Thursday, February 04, 2010

What is an i-share, update 2010

What is an i-share? (What is an ishare?)

Where can I find returns of 50%, safely, from home?

It has been over 18 months since we published the article "What is an i-share?" on the internet blog and the news travels slowly for some. If you would like to see the original article, you can scroll down or press CTRL+F & type in "what is an i-share".

[Interestingly, if you go to Google and do a world-wide search for "what is an i-share" using the quotation marks, you will only receive TWO matches...]

[When is the last time you typed in something to Google and only received two matches? Crikey, you can find over 900 000 references for "fried ice-cream recipe", almost 2 million pages for "drop forty pounds by Christmas" and over 400 000 references to "Buddha's testicles"... (no offence to anyone, regardless of their religious beliefs: we just thought of the most obscure things that we could think of to see if we could return a result of only two matches in Google!)]

Why is there so little information on i-shares, particularly when they are so fabulously GOOD?

In the year that was 2008-09, we experienced the (so-called) "Global Financial Crisis" or "GFC". This was a year of massive share-market drops, billions of dollars wiped out of super funds (apparently) and personal investors cried into their coffee as stockmarkets around the world plummeted like a hot rock...

Or did they?

If the "GFC" was truly a "Global" event, perhaps somebody forgot to translate the memo into languages other than English...

[It is oddly amusing to watch the "World Series" of baseball in the USA, knowing that only the US ever competes in it: no other country has ever won the (so-called) World Series of Baseball.]

[Also amusing is the western world's "World Music Awards" and Movie Industry Awards, which predominantly showcase singers and actors who speak English and work in the USA, UK, Australia or Canada.

Somehow we often forget that movies in China or India will draw crowds 100 times greater than movies in English, or we forget that artists singing in Asia will sell many more millions of albums than artists in the USA or UK.

Remember that China & India are 38% of the world population; USA, UK, Australia & Canada all together make up only 6%. And now back to our feature presentation...]

If the "GFC" was truly a "Global" event, perhaps somebody forgot to translate the memo into languages other than English...

In the "Global Financial Crisis", the US market dropped over 50%, the Australian market dropped over 50%, Europe and the UK fared worse... but what happened in the rest of the world?

China and India ALONE make up almost 38% of the world population; and they are still having more babies. Asian economies are not just growing their populations, they are growing their workforce, their output, their GDP and their business income.

Whilst the US market and the Australian market were going down 50% last year with the "GFC", what was happening in other countries?

We used to hear about the "BRIC" economies, what happened there?

Good question, thanks for asking. While the "rest of the world" (the ones who speak English) were showing negative returns, the average of the (Brazil, Russia, India & China) "BRIC index" posted a return of positive +93%.

Can I invest into BRIC from home?

Yes, you can actually buy the indexes of these countries (or the combined BRIC index) quite easily on the Australian or US stock exchange. To open a broking account for no charge, go to and click on INVESTORS at the bottom of the page. Trades start from just $19.

What about returns in other economies?

Whilst the English-speaking world was reporting doom & gloom in the newspapers and watching stocks fall by 50%, the BRIC index posted +93%. The available index in China posted a healthy +52%.

The available index in Hong Kong returned investors +60%. Yes, this one is available to both US investors and Australian investors

Other "future emerging" economies returned +46%. This doesn't sound so impressive, coming off the back of China's +52% and Hong Kong's +60%, but remember that we are comparing to the average reported GFC return of around minus -50%.

That disparity reflects an almost 100% difference in returns between the "average" investor (who may have been invested into the default fund for super, or an average managed fund or stock portfolio) and the "educated" investor, who may have followed our advice 18 months ago and decided to invest into other economies.

But wait, there's still more...

OK, so BRIC is beautiful and Asia is awesome, what other areas should we watch in order to make lots of money in future?

As investors and consumers look for better returns on their money and better bargains, we expect much more outsourcing to occur.

A few years ago, the average Chinese wage was around $1 US per day. With major corporations opening factories all across mainland China, workers found that competitors would "bid up" the daily rate in order to get more workers.

Over the last five years, an enterprising Chinese worker could have seen their earnings lift from $1 per day to around $1 per hour. Some Chinese workers now receive over US $2 000 per year for their work (2010 Bureau figures).

This rate is still far lower than the average worker in developed countries, BUT there are still some companies who want to pay less than this hourly rate.

If you were a major manufacturer of mobile phones, cars, DVD players and plasma screens, where would you put your factory?

You could put your factory anywhere you liked, but if you employed US workers or Australian staff, you could be paying $40 000 to $50 000 per year. The lower rates of pay in China ($2 0000 p.a.) are a big part of the reason why "everything is made in China" and major companies can sell products more cheaply than previously and still make massive profits. (Consider how much cheaper most electrical appliances are now, compared to five years ago).

Show me the MONEY!

Remember that you heard it here first, and remember to take some action on the new information, otherwise it is just hearsay. No-one wants to hear you say "I knew ten years ago that China was going to be a major economic super-power". That is like taking no action and then telling everyone that you knew the winner of the race after it is over.

Put your money where your mouth is, so instead of saying "Yes, I knew that" long after the event is over, you can say "I just made $500 betting on that winner" or
"Yes, my investment in China back in 2001 is now up 387%"

[True story. After a trip to China in 2000, Jeremy invested into a "Who's Taking Your Money?" stock and sold out in 2007 for over 450% gain. Buy the book & get a Money Back Guarantee here. ]

Is the Chinese boom over? Not by a long-shot. China's growth will continue, albeit at a steadier pace. There may be other areas in the world who are ready to boom very quickly, just as China did.

Now that the average wage in China is increasing, where will the factories go? Who will be making my digital camera in 2015?

Looking at where the big corporations may go to build their new factories is a matter of research and guessing. So, we like to just look at the "early adopters" and see where they go, because we know that where Nike goes, the rest of the big corporate world may eventually follow...

Rather than flying around the world chasing corporate executives in Lear jets to see where they land, we use the internet. You can readily find out the increasing GDP of a country, its wage growth and the growth of its local stock market, all from your own home PC.

While stocks in China grew at 52% over the last year, who did better?

To mention just two, Brazil's stock market index was up a whopping 128%, and Peru returned a healthy 104%.

Wait a second, Did you say "Peru"? As in Paddington Bear, Peru?

Yes, Peru. It was thirty years ago that China was closed to the world, and not one tourist had ever set foot on the Great Wall. Twenty years ago, the USA was the world's most prosperous nation who sent money to "the poor Chinese" to feed the starving primitives. Ten years ago, no Chinese citizen could own a car. Five years ago, the USA imported ("bought") from China $243 Billion worth of goods and exported ("sold") just $41 Billion, netting the Chinese a US$200 Billion profit from USA alone...

In 2010, the USA owes China over $780 Billion... An amazing turnaround for the once-poor nation to be lending almost a Trillion dollars to the USA. Now that the Chinese own almost 25% of the USA, will they continue to trade?

Absolutely. The Chinese know how to make money. But as US factories are forced to pay up to $2 000 a year for skilled Chinese workers, they are looking further afield for labour forces. Peru and Brazil are countries that offer cheap labour. Wages for a "garment cutter" in Peru are just $180 per year. A personal assistant can be had in Brazil for just over $120 per year.

Your Levi jeans that are currently designed in USA and made in China could soon be made in Brazil or Peru.

Within the next few years, "Made in China" may no longer be so wide-spread, just as "Made in Japan" was prolific before 1997 and is now scarce.

Australian & US investors can access investments in these newly emerging economies by buying the Index of that country or region. This is like buying a basket of the top 25 or top 100 shares and is much safer than buying an individual company.

The ("i" being for international) i-share code for investing into the Chinese index -- from America is FXI, from the UK is FXC and from Australia the Chinese index trades on the local stock exchange as IZZ.

For Brazil, BRIC, China, Hong Kong, Peru and other codes, plus a list of their performance, google i-shares or contact us at

Seriously? What the? Wait... Peru? The Peruvian sharemarket is up 104%?

Yes. We are not promising that any of these future emerging economies will be "the next China", nor do we promise that past performance will continue. We just look at what is happening, what has happened and try to draw a line to what is likely to occur in future.

Wages in China, although having grown dramatically, are not yet on par with the western world. This may indicate that China has some growth up its sleeve and a long way to go over the next decade. China could possibly sustain growth from 5% to 10% year on year for a long way yet. Ditto for India.

Having said that, growth in the other third world countries may supersede China and India in the shorter-term. Judging by recent performances, they are doing very well and still have a way to go.


Invest wisely and safely; we suggest that i-shares are a small section of your portfolio as the emerging economies carry higher risk than established countries. Do not invest all of your money into one region or one index; spread the risk.

For further information or to start investing overseas, contact your existing broker or a financial planner who can advise on i-shares, or visit our website or call 1300 762 624. Be wise enough to take care and sensible enough to take action.

Investment Management Professionals Pty Ltd ABN 37 115 359 316, Corrporate Authorised Representative #306558, WealthSure Pty Ltd,
ABN 93 097 405 108, AFSL 238030.