Emerging Markets – Vietnam

I figured I would do another one of these emerging economies posts. Countries are just so interesting! Let’s go with Vietnam this time.

Another beautiful country
Another beautiful country

 

Vietnam has already had a few years with good amounts of foreign investment to develop, as opposed to Myanmar which is only just now really opening up investment in it’s country. However, like Myanmar it’s corruption is holding itself back in a number of ways. Luckily, the workforce  is pretty educated, with 93% literacy.

Vietnam has engaged in trade liberalization since the early 2000’s. It became a member of the World Trade Organization in 2007. It has shifted from a highly centralized and planned economy to a socialist-oriented market economy. Currently. Deep poverty, defined as the percent of people living on 1$ a day, has greatly decreased due in part to the equitable economic policies of the government.

Interestingly, Information Technology and High-Tech industry now forms a large and quickly growing part of Vietnam’s economy.

The government of Vietnam has recently shown support for its own start-up ecosystem. Vietnam aims to develop as a country into middle-income status by 2020. The “socialist republic” structure of government seems happy to meddle directly with countries which can cause problems with it’s stock market.

There is some good news. Vietnam is still classified as a frontier market by index constructors and it creates a huge difference in investors perceptions when viewing how a market is classified. The amount of institutional money invested in these frontier markets is tiny compared with emerging markets.

An emerging market sounds like an exciting proposition and suggests a growing economy, whereas a frontier market seems more risky to investors. If this is your mindset, you should be happy to learn that Vietnam is widely expected to be bumped up from frontier to emerging market status at some point in the near future. This upgrade should open up a lot of investment and therefore you might want to consider increasing your exposure to the Vietnamese market.

The best ways to increase exposure to Vietnam would be the emerging market indexes that of course, include some Vietnamese equity. One that has direct exposure and focuses solely on Vietnam is “The Market Vectors Vietnam ETF” (VNM). While the ETF hasn’t done well since its inception, some of the holdings have done very well. I plan on further analyzing some of their more promising holdings.

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Taking on Debt as a Student.

With tuition and school fees at an all-time high, students are taking on more and more debt to pay off their education. But what is the best choice for a student, a student line of credit or a government backed school loan.

Many people have an idea that government loans help the average person more, I mean, why would the government have it out for anyone? However, for people who do a good job of managing expenses the right choice leans more towards a student line of credit. This is because of the lower interest rate (Prime + 1%: Currently 2.70% + 1% = 3.70%) versus the Federal Government loan which is Prime + 2.5% or 5.2% with the floating rate and Prime + 5% = 7.7% with fixed) The extra 1.5% – 4% adds up quite a bit especially when you take more than 2 or 3 years to pay it off.

The reason why skills in managing expenses is recommended for students looking at a student line of credit is because of the higher loan amount available to students (up to 15,000$ per year for undergraduate where Government student loan is closer to 5,000 to 10,000 per year). A higher loan amount can end up equaling lots of unnecessary costs throughout the degree program with someone who spends like an idiot. This is why the spending discipline is recommended. The only real downside with the line of credit is the exempt status of bursaries and the like.

4 Habits for Building Wealth.

1. Define Your Goals.

Poda Island Beach
Poda Island Beach

Maintain goals to keep an idea of where you are headed. At the end of the day, review your goals in order to keep them in mind and keep you on track. Why do you want these things? Have a clear answer in your head to this question.

2. Don’t get distracted.

In this world of instant gratification and advertising, it is crucial to stay on task towards your goals and not be swayed to buy the “latest toy”. If you can fit it in your budget without changing the budget for that month, that is totally fine. After all, the pursuit of wealth shouldn’t be the only motivation in your life unless it is your ultimate goal.

3. Acquire knowledge

Knawledge!
Knawledge!

Read books, watch Ted talks, hell, read blogs! No matter where you are in life, you can learn more. Being interested in what you do and putting in the effort to learn about it is one of the most important habits out there. It just helps life in so many ways!

 

4. Make the most of each day.

The successful people I’ve known don’t just end their day when their job was done, they made sure to fit in exercise and reading. If you get done what you wanted to get done in the day, that’s good, but going to the next level will go a long way to help reinforce the other habits mentioned here.