Emerging Markets on a Roll

Hence, I'm making the case for buying U.S. equities with BRIC exposure. The management teams of large U.S. firms manage currency risk quite ably, and it's reflected in their earnings. The BRIC-exposed companies we like and own are as follows:

I might add General Motors(GM) to the list. We don't own GM, but I've been impressed with their progress in Asia, and you may be surprised to learn that Buick is one of the fastest growing brands in China.

All this being said, I would not go with domestic equities entirely. While a strong economy and corporate earnings are highly correlated, a strong economy and the market index performance have a short-term low correlation and a high long term correlation.

Therefore the ETFs allow you to capitalize on the long-term growth in these markets as their middle classes expand, while diminishing equity specific risks such as scandal, regulatory changes, and the dynamics of the political landscape.

Here's the year-to-date performance for the BRIC nations:

I cannot stress enough the importance of reducing risk where you can. Certainly taking on more risk can lead to higher returns, but it can also lead to loss of capital which is tragic, and increasingly harder to replace -- especially as you age!

If you've been smart and fortunate enough to have invested in EM markets so far, this may prove to be a good time to reduce your risk by cutting your direct exposure through ETFs and shifting proceeds into U.S. multinationals with significant EM sales growth potential.