No bargain in absence of fear

By Eliot Hastie
 — 1 minute read

There are no bargains to be found in investing if there is also no fear attached, according to Research Affiliates chairman.

Research Affiliates chairman Rob Arnott made the comments in regard to investing in emerging markets.

“There is no such thing as a bargain in the absence of fear. When people say I want to wait until things are less daunting that’s the same thing as saying I want to wait until the bargain has disappeared,” he said.


Mr Arnott said he viewed emerging markets very favourably given how cheap its P/E ratio is.

“Emerging market stocks are trading at a price relative to 10-year smoothed earnings at 13, the US is at 32, Australia is at 16 or 17,” he said.

However, even better still were how emerging markets value stocks were priced in single digits said Mr Arnott.

“If you can buy half the world’s GDP for nine times earning you just do it. It’s a very attractive price,” he said.

The price could continue to go down and get cheaper, but Mr Arnott said that should be in any investors plan.

“The correct response to bargains isn’t to go all in, it’s to start averaging in and that’s what we advocate in emerging markets,” he said.

Mr Arnott said the emerging markets price considered many of the issues that other investors brought up when investing in the markets.

“Common response is well yes but with tariffs, with the FED raising its rates, these economies are facing some daunting headwinds and there once again my response would be is the market unaware of that. Is that not in the price,” he said.

Mr Arnott said that investing in Australia was also a very attractive offer due to the market being priced at half the US multiple.

“For Australian investors you have the advantage that home country biases isn’t going to hurt you. I view Australia as an attractive place to invest,” he said.


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No bargain in absence of fear
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