The best time to buy growing shares is when they’re trading a bit cheaper temporarily. I particularly like it when specific issues affect individual shares, allowing me to buy them cheaper in the short-term. It makes it an obvious investment choice when company X is trading cheaper but the rest of the market is holding steady.
One particular issue affecting some areas of the global share market at the moment is the build-up of a trade war between the US and China. President Trump seems to be trying to bully the Chinese into making concessions to US and American businesses.
Who knows if he will be successful? I’ve seen many anecdotes where US businesses and individuals will face higher costs because many of their supplies and parts come from China. Unintended consequences can be very frustrating.
What is happening is that investors are being nervous about investing in Asian businesses. That’s why now could be the right time to start buying shares. Of course, the trade war could get worse and the Asian shares could fall further, so it might be an idea to start a position and buy more if the news gets worse for even cheaper prices.
I am personally interested in taking a diversified approach to investing in Asia by choosing exchange-traded funds. Two of my favourite ideas are Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE) and UBS IQ MSCI Asia APEX 50 Ethical ETF (ASX: UBP). Both of these indexes have fallen in recent weeks.
For starters, quite a few of the constituents in these indexes aren’t actually based in China, such as Samsung, meaning they’re not directly affected like Chinese businesses. Many of the largest businesses in these ETFs could become the largest in the world such as Tencent and Alibaba. There’s good growth potential.
The Vanguard ETF is a low-cost option for an annual management fee of 0.4% and will likely keep getting lower due to the Vanguard business model. It holds over 800 positions with businesses based in China, South Korea, Taiwan, Hong Kong, India, Singapore, Thailand, Malaysia, Indonesia and the Philippines.
The UBS Asian ETF has an annual management fee of 0.45% and provides exposure to the 50 largest businesses listed in Asia outside of Japan. If you only want exposure to the largest Asian businesses then this could be the preferable option.
Of course, these ETFs also come with higher risks. The governance risk is much higher with Chinese businesses compared to US or European based businesses.
I think the current climate provides a better time to buy one of these ETFs because of the current fear. Whilst there’s a good chance they could keep falling, I think that would give a good opportunity to add to a position.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.