We continue to hear a lot about the developing part of the world, generally known as ‘emerging markets.’ I have been a fan for 10 years know and these areas can still be wonderful opportunities. However, like any investment, we should look carefully at the risks first.

It is important to go beyond the headlines and dig deeper into the economic, political, and social background of a market before you invest. For instance factors like the quality of life of its people can help determine if a certain country may be right for us. Here are three of the most common barriers to growth.

• Infrastructure. Is the government actively involved in creating a sound infrastructure? Is there a strong, and growing, system of roads, bridges, sewer lines? Are there reliable ways to get products to market?
• Viable tax system. Is there a monetary system in place that will work? Are people allowed to make money properly and to contribute to the government in a fair and consistent manner? How is government funded, and is it sustainable?
• Corruption. How rampant is corruption? Is government aware of it – or an active part of it? Does government have a plan to counter it?

Buying the products of financial companies rather than the financial company itself is a common occurrence in today’s market. Below I have listed two real examples of this so you can further understand this point and apply it to your financial lives.

Firstly, we have a well-known mutual fund company that has recently had its stock return over 125% in a 1-year period and over 30% per year over a 5 year period. It has also had a healthy 5-7% dividend yield on top of the yearly price gains. Their lineup featured close to 200 funds, but only 6 of them were over 10% ROI during the same period. Considering these numbers, I would feel more confident buying the stock of the company directly instead of just putting my money in their mutual fund products.

My second example features a typical bank. Often people tell me about their bank GIC paying them 3%. They say that they trust their bank and that they like their products. But I like to point out that if trust is the issue then they should consider buying the bank’s stock which has often produced a 10-15% return, instead of just using the GIC product. This way you are still going with a company you trust, but you will very likely be getting a higher return in the process.

Investors hate uncertainty and right now Japan, Africa, the USA financial turmoil, and government debt all over the world are supplying lots of it. However, the actual stock market valuation (price-to-earnings ratio or PE) is far more important than fear mongering news, and will lead to market dips much faster. Since most countries are currently still right around their historical PE average of about 15, not on sale mind you but not expensive either, there doesn’t appear to be a high risk due to price.

I am more concerned about both the prospect of rising interest rates and high oil prices than I am from global uprisings or current stock prices. If interest rates start to rise, it will be much harder to make money just by holding bonds. This has worked for a long time, as rates have been declining or flat for over 25 years. So I now favour a more active income strategy over a buy/hold approach in the bond area. Maintaining quality dividends will also remain important.

Since Canada is rich with energy supply you will often hear a positive spin from analysts when oil prices rise. However this always eventually leads to an economic slow down, which is never a good thing. I read a great research article one time that demonstrated that every single recession we have ever had was accompanied by either rising interest rates or rising oil prices. These are the areas we need to watch.

I always encourage people to take a holistic view on any situation. This thinking may apply to your entire life, your career, and of course the management of your wealth. On this topic, a critical point is to keep your money in motion.

Money that lies still and is not able to move about does not create new wealth through cash flow. By just staying put it is not able to serve more than one purpose. This principle applies equally to individuals and the economy in general. When money flows freely within a country, the economy booms. When it stops flowing, as in the 2008 credit crunch, we are quickly in a recession. The banks also use this concept to their advantage. They are very happy to give you 3% on your GIC and then loan your money right back out to someone else at 8%.

Your GIC is not the only place where your money becomes illiquid. A parcel of undeveloped land, a home, an annuity, and a long bond are all examples of assets that serve only one purpose. In order to get the most out of your money, you should ensure that your money is in constant motion so that it doesn’t become stagnant and cause you to lose opportunities to enhance returns.