The Biggest Lesson of the BRIC Hype

By Markets Fool.com

On this edition of Motley Fool Answers, we go international, looking at the BRIC nations -- Brazil, Russian, India, and China --which were viewed as having huge potential 10 or 15 years ago. In this segment, Joe Magyer,Chief Investment Officer at Lakehouse Capital and regular contributor to Fool Australia, talks to Alison Southwick and Robert Brokamp about why you shouldn't get wrapped up in an investment premise that "everyone" agrees on.

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A full transcript follows the video.

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This podcast was recorded on Sept. 20, 2016

Alison Southwick:So that was the BRIC. A lot of articles I read lately say the BRIC is dead, but they somehow turn it into a pun.

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Joe Magyer:Broken.

Southwick:Yes, the BRIC is broken.

Magyer:It's hard.

Southwick:So what's the lesson here going forward? If there is one at all.

Magyer:To tap something Bro said earlier, I think by the time a really cute acronym has come up for something, that probably means a lot of the money has already been made. Like FANG jumps out, right?

Southwick:Right.

Magyer:And I don't know if people...

Southwick:Facebook, Amazon,Alphabet? I feel like the A changes as much...

Magyer:I guess it would be FAANA? But yes, it was Facebook, Amazon,Netflix, and Google. They'd all done incredibly well. I own Amazon and what is now Alphabet. I think they're great businesses -- all four are great businesses. That said, everyone is pretty well latched onto that at this point, so I think anytime you distill something down and it's that cute, reality is just not that cute. You need to be more diversified than that, and it's easy to get caught up on that focus when you should think bigger.

Robert Brokamp:Yeah, when everyone is agreeing on an investment premise, it probably means that the money has already been made, and it's not necessarily the best place to be. Then it turned for the BRICs, and they did not do so well, and then everyone hated them. Well, what's been the best-performing country so far this year? Brazil, because after a few years of being among the worst countries, everyone hated it, and everyone talked about how the BRICs were falling apart. That's probably the time to start buying.

Magyer:And to flip this around for Americans and the handful of Australians listening...

Southwick:They do listen. We do have Australian listeners. Hi, Scott.

Brokamp:They're upside-down, though.

Magyer:This is a common thing you'll hear from people in Australia: The property doubles in value every seven years. That would be like 10% annualized growth in property. And property has done incredibly well over 20 years in Australia. There's been a huge bull run. There hasn't been a recession in 25 years. Life's been great. However...

Southwick:Life does sound great in Australia.

Magyer:Honestly, it really is great. But an American, hearing that property keeps going up 10% a year, every year -- and someone who has seen that logic before when people felt that way, and then seen how it plays out after -- is a little more skeptical of that.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors.The Motley Fool owns shares of and recommends Alphabet (A shares), Amazon.com, Facebook, and Netflix. Try any of our Foolish newsletter services free for 30 days. 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.