Is Brazil Worth Investing in?

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By Jacob Maslow

sao paulo brazilIf you subscribe to the old investing strategy of buying on bad news and selling on good news, you should be excited about Brazil. Brazil has a lot of natural resources and a strong capital infrastructure. On top of all that, it’s one of the world’s biggest exporters. Considering the fact that it has a huge amount of land and a growing population, it’s easy to appreciate and recognize Brazil’s bright future prospects.

With that said, stagflation has gripped Brazil recently. The economy isn’t simply growing as fast as it should. On top of that, inflation is killing the rank and file Brazilians’ purchasing power. Put this all together and it’s easy to see why Brazil’s stock exchange isn’t going anywhere. In fact, it looks downright susceptible.

While it’s tempting to jump into the Brazilian equities market and buy on the bad news, I wouldn’t advise it. The truth is it’s still too early to call the Brazil market and decide to jump in. The reason why I said it’s still too early because we’re still waiting for the other shoe to fall as far as developed markets are concerned. We all know that the current market valuations are based on bubble markets. Thanks to the cheap stimulus money pumped into developed economies, finance markets from all four corners of the globe are now heavily inflated. Jumping into Brazilian stocks at this present time doesn’t make any sense because there’s no correction. It’s probably a good idea to wait for the correction and do dollar-cost averaging to ride Brazilian stocks all the way to the bottom. This way, they don’t need to make much upward movement for you to break-even. This is probably the best strategy. Your trigger should be a long sustained correction phase. Keep in mind that this correction phase must not just be in Brazil but globally.

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