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In the Baltic countries, investing is a new experience for many. As incomes rise with strong economic growth, citizens have the opportunity to build wealth. For the majority, there is little information and knowledge. Most local experts also have little experience with the boom and bust nature of emerging markets and their asset classes. For example, history shows us that there is almost always a real estate bubble followed by a nasty decline for new economies.
I have been a student of investing for 35 years; an investment strategist at a major US bank, a stock market theoretician, and taught modern portfolio theory for almost 25 years. My conclusion and experience is that stocks are a superior investment to everything else. The risk of investing in stocks can be greatly reduced through logical diversification. The risk of bonds however is greatly understated as are many other asset classes especially real estate which may be the riskiest of all if you use borrowed money.
When you buy a stock, you buy the work, ideas, and skills of others and future growth which can translate into higher dividends and compounding returns. When you give your money to the government to spend, there is no growth. Interest rates are now at the far end of the scale in the Baltic countries, far too low to compensate for inflation and geo-political risk. When interest rates are so low, the theoretical risks of owning a bond are extreme. In 1999 you could buy long term bonds in Lithuania yielding 21%. Now you get only 4.28%. Government Bonds can default. Worth less than 20 cents on a dollar and pay no interest. Argentina.
Research studies show that $1 invested continuously in US government long term bonds at the end of 1925 would have returned $70.85 at the end of 2005. The same dollar would have been worth $2,687 usd if invested in large company stocks – 38 times more. And if you had bought small company stocks, 6 times better than that. If you bought only small cap value stocks, your is worth $45,144 usd and you would have had less risk.
We invest in small cap value stocks at ZPR Investment Management, Inc. Consequently we think we have the best performance of any manager or mutual fund the last 18 years. For the last 5 years, we have been among the top 10 managers measured by Morningstar out of 7000 in all styles and the best manager for global equity. Morningstar gives us their highest rating (5 stars) and Wall Street Online ranks us first for risk adjusted performance. In Lithuania we have the ZPR US Small Cap Value mutual fund offered by Hansabank.
Our websites are http://www.zprim.com and http://www.zprussmallcap.com
I have been a student of investing for 35 years; an investment strategist at a major US bank, a stock market theoretician, and taught modern portfolio theory for almost 25 years. My conclusion and experience is that stocks are a superior investment to everything else. The risk of investing in stocks can be greatly reduced through logical diversification. The risk of bonds however is greatly understated as are many other asset classes especially real estate which may be the riskiest of all if you use borrowed money.
When you buy a stock, you buy the work, ideas, and skills of others and future growth which can translate into higher dividends and compounding returns. When you give your money to the government to spend, there is no growth. Interest rates are now at the far end of the scale in the Baltic countries, far too low to compensate for inflation and geo-political risk. When interest rates are so low, the theoretical risks of owning a bond are extreme. In 1999 you could buy long term bonds in Lithuania yielding 21%. Now you get only 4.28%. Government Bonds can default. Worth less than 20 cents on a dollar and pay no interest. Argentina.
Research studies show that $1 invested continuously in US government long term bonds at the end of 1925 would have returned $70.85 at the end of 2005. The same dollar would have been worth $2,687 usd if invested in large company stocks – 38 times more. And if you had bought small company stocks, 6 times better than that. If you bought only small cap value stocks, your is worth $45,144 usd and you would have had less risk.
We invest in small cap value stocks at ZPR Investment Management, Inc. Consequently we think we have the best performance of any manager or mutual fund the last 18 years. For the last 5 years, we have been among the top 10 managers measured by Morningstar out of 7000 in all styles and the best manager for global equity. Morningstar gives us their highest rating (5 stars) and Wall Street Online ranks us first for risk adjusted performance. In Lithuania we have the ZPR US Small Cap Value mutual fund offered by Hansabank.
Our websites are http://www.zprim.com and http://www.zprussmallcap.com