In a time of general economic distress, it can be helpful to look for where green shoots might appear in the future. Although there are growth stories in the U.S. and other big, developed markets, these are usually considered mature economies. They also have the problems of mature economies – debt burdens, aging populations and bursting bubbles.
In the long run, much of the world’s growth will have to come from emerging economies: places like India and Brazil, where populations are relatively poor but gaining every day; where the middle class is booming; where people are growing accustomed to new luxuries like cars, refrigerators and internet access.
The phenomenon of formerly poor countries developing rapidly led to the creation of the acronym "BRIC" (Brazil, Russia, India, China). These four countries are regarded as the biggest success stories of the emerging markets, although Russia is more of a re-emerging market after disastrous post-Soviet crashes.
For an example of how emerging markets will affect the future, just look at two funds: the SPDR S&P 500 exchange-traded fund (SPY), and the iShares MSCI Brazil Index ETF (EWZ), which tracks big Brazilian firms.
Brazil is still a smaller, poorer and younger country than the U.S. But that gives it room to grow: in the past five years, including the 2008 crash, EWZ has gained over 160 percent. The SPY has lost about 13 percent.
Young investors have more time to ride out the volatility in emerging markets, and they can buy the lows. In the long run, you’ll see much better growth from young, poorer economies than rich, stagnant ones.