For investors, emerging markets represent the next stages of global growth. The World Bank estimates emerging markets will expand by 5.9% in 2011 and 6.1% in 2012. That's more than double their developed market twins. Funds like the SPDR S&P BRIC 40 (NYSE:BIK) have become popular ways to target exposure to the developing world. However, not all emerging markets are alike. Fast-growing nations such as China and Brazil have struggled in recent months to contain inflation and control heavy inflows of investment money. For portfolios, finding a balance between fast growth and developed stability is paramount. One group of nations could be just what a portfolio needs.
TUTORIAL: Mutual Funds: Introduction

The "Midcaps" of the Emerging World
Many analysts have highlighted midcap stocks' potential. Faster growing than large caps, but safer and more stable than small cap, midcaps represent a great growth opportunity. For emerging market investors, finding those nations that straddle the line between developed and developing markets could be the best way to play the EM space. The "TICK" bloc of Taiwan, Israel, Chile, and Korea represent such an opportunity. Overall, these four nations have substantially higher GDPs per capita than the more famous BRIC nations and feature lower unemployment rates. In addition, the TICK represents a bloc of pure democratic nations, with ties to the U.S. and Europe. This translates into reduced political and business risk relative to many other emerging markets. (Emerging markets provide new investment opportunities, but there are risks. For more, see What Is An Emerging Market Economy?)

Adding the TICK
Each of the four TICK nations has variety of individual pluses and minuses. Unfortunately, the bloc is generally underweighted in the most common ways to access emerging markets and there isn't a single TICK ETF as of yet. However, each of these nations is available individually and can be combined to make a TICK portfolio weighting.

Taiwan's GDP grew at an astonishing 10.47% rate in 2010. This was the largest increase in GDP over the last 23 years. This breakneck growth was courtesy of the nation's relationship with China. Taiwan supplies an abundant amount of technology components for Chinese factories to assemble and export. The island's exports surged to $275 billion last year, with exports to China accounting for more than 42% of that total. The nation continues to be a leader within the semiconductor and smart phone sectors and has recently added biotechnology supplier to its mix. Investors can add Taiwan via the iShares MSCI Taiwan Index (NYSE:EWT) or via the small cap focused IQ Taiwan Small Cap ETF (Nasdaq:TWON). (ETFs are a viable alternative to mutual funds, but before you invest, there are a few things you should know. For more, see Using ETFs To Build A Cost-Effective Portfolio.)

Israel continues to be known for its high tech economy. However, recent innovations in hydraulic fracturing could make the tiny Middle Eastern nation an oil and gas powerhouse. New deep water offshore fields could also help fuel Israel's energy renaissance. Even if the oil claims don't pan out, Israel still has the highest rate of start-up companies in the world and leads in patent registrations per capita. Israel's political ties with the United States have resulted in a plethora of the nation's companies trading on U.S. exchanges such as Teva Pharmaceutical (Nasdaq:TEVA) and Ceragon Networks (Nasdaq:CRNT). The iShares MSCI Israel (NYSE:EIS) can be used as an overarching play.

Chile's economy could almost be seen as a proxy for the copper market. However, despite this dependency on exports, Chile uses conservative account management and banks extra copper revenues during good times and saves them for when prices fall. The nation is also major producer of gold, timber and various agricultural crops, and is home to one of the best telecommunication networks in all of Latin America. Chile can be accessed via the iShares MSCI Chile (NYSE:ECH).

Switching gears from a pure manufacturing economy to one based on high technology, South Korea has managed to stay competitive on a global landscape. Featuring some of the fastest broadband speeds and a new smart grid/energy efficiency mandate, the country is continuing its push into the 21st century. Both the iShares MSCI South Korea Index (NYSE:EWY) and IQ South Korea Small Cap ETF (Nasdaq:SKOR) provide access to the dynamic nation.

Bottom Line
Long term potential for the emerging market nations is great. However, with some analysts worried about inflation hindering the story, finding a balance of growth and safety is paramount. The TICK bloc of Taiwan, Israel, Chile and South Korea offer a blend of both developed and emerging market characteristics that makes them a perfect way to play any sort of emerging market slowdown. (For related reading, see Investing In Emerging Market Debt.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Chart Advisor

    Now Could Be The Time To Buy IPOs

    There has been lots of hype around the IPO market lately. We'll take a look at whether now is the time to buy.
  2. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  3. Economics

    Long-Term Investing Impact of the Paris Attacks

    We share some insights on how the recent terrorist attacks in Paris could impact the economy and markets going forward.
  4. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  5. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  6. Mutual Funds & ETFs

    Buying Vanguard Mutual Funds Vs. ETFs

    Learn about the differences between Vanguard's mutual fund and ETF products, and discover which may be more appropriate for investors.
  7. Mutual Funds & ETFs

    ETFs Vs. Mutual Funds: Choosing For Your Retirement

    Learn about the difference between using mutual funds versus ETFs for retirement, including which investment strategies and goals are best served by each.
  8. Mutual Funds & ETFs

    How to Reinvest Dividends from ETFs

    Learn about reinvesting ETF dividends, including the benefits and drawbacks of dividend reinvestment plans (DRIPs) and manual reinvestment.
  9. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  10. Mutual Funds & ETFs

    Best 3 Vanguard Funds that Track the Top 500 Companies

    Discover the three Vanguard funds tracking the S&P 500 Index, and learn about the characteristics and historical statistics of these funds.
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. How do mutual funds work in India?

    Mutual funds in India work in much the same way as mutual funds in the United States. Like their American counterparts, Indian ... Read Full Answer >>
  3. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  4. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  5. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  6. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>

You May Also Like

Trading Center