Benefitting from new free-trade agreements coupled with lower energy costs, lower transportation costs and lower labor costs compared to many other countries, Mexico is poised for manufacturing growth. As Mexico’s manufacturing sector grows, other areas of Mexico’s economy are expected to benefit as well, which can provide an opportunity for investors.
Here’s how to invest in Mexican stocks.
Main Takeaways: Buying Mexican Stocks
- The Mexican Stock Exchange is called the Mexican Bolsa. Mexican stocks can also be listed on many U.S. exchanges as well.
- There are many benefits to trading Mexican stocks. These include faster growth, diversifying your portfolio, and other reasons we explore below.
- You must find a broker that allows you to trade foreign stocks. Along with companies to watch, we take a look at your best options for brokers to use when buying Mexican stocks.
What is the Mexican Stock Exchange?
Mexico City is the hub for stock trading in Mexico in both the Mexican Stock Exchange, also called Mexican Bolsa, Mexbol, Bolsa Mexicana de Valores, or BMV (the largest exchange) and Bolsa Institucional de Valores, also known as BIVA.
These two exchanges serve a similar function to well-known American exchanges, like the New York Stock Exchange or the NASDAQ.
Both exchanges provide stock trading, as well as trading on other financial instruments. Much like in the U.S., where the stock market is comprised of several exchanges, activity on both Mexican exchanges should be considered.
Trading on the Mexican exchanges isn’t much different than trading on U.S. exchanges. Similar trading options are available and the exchanges are regulated by Mexico’s National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, or CNBV).
Companies can be listed with just one exchange but can be quoted on both and many non-Mexican companies trade on the exchanges as well, like Citigroup (C) and Anheuser-Busch Inbev (ABI).
There are also a number of Mexican stocks that trade on U.S. exchanges, such as Wal-Mart de Mexico or Walmex (WMMVY), which is incorporated as a Walmart subsidiary serving Mexico and Central American countries. América Móvil (AMOV, AMX), a leading provider of wireless service in Latin America, also trades on U.S. exchanges.
Mexico’s economy has independent elements but also tends to trend broadly with the U.S. economy due to the close economic relationship between the two neighbors.
Following a chart of the IPC index, which tracks Mexican equities, you might think you’re looking at a chart of the S&P 500 or NYSE Composite, complete with the market swoon in 2008, followed by steady growth in the following years. To fully leverage Mexico’s continuing growth in manufacturing and related industries, you may need to invest in individual Mexican companies or tightly focused indexes.
Much like with U.S. trading, you’ll need an online stock broker — but one authorized to trade on Mexican exchanges.
Pros and Cons of Buying Mexican Stocks
The largest draws to investing in Mexican stocks and other foreign stocks are the opportunities for faster growth than you might find with similar U.S.-based companies and the chance to diversify beyond U.S. companies.
Investing in Mexican stocks has both its pros and cons — as well as a few things to simply be aware of before making a financial commitment.
- Possibility of faster growth: As part of an emerging market fueled by lower costs of energy and labor, Mexican companies may offer an opportunity for outsized returns.
- Diversification: Investing in just one sector comes with its risks. On a bigger scale, investing in just one country has risks as well. Investing in Mexican stocks provides a unique form of diversification not available with only U.S.-based investment types.
- United States-Mexico-Canada Agreement (USMCA): The replacement for NAFTA puts Mexico on equal footing with larger economies and is expected to benefit Mexican companies and workers, possibly giving the overall economy a boost.
- Economic risk: Mexico’s GDP growth has been generally steady, but the economic growth turned negative unexpectedly in the 1st quarter of 2019, a reminder that growth in emerging markets isn’t always guaranteed.
- Political risk: Risk due to political factors can come in several forms. Much like in the U.S., markets can be moved by uncertainty and by the actions of governments, which in Mexico’s case can be either Mexico’s government or the U.S. government’s actions.
- Currency risk: Investing in emerging markets can mean currency risk, wherein the trades occur in pesos and then have to be converted back to dollars, possibly reducing the value of the trade due to currency price movements.
- Liquidity risk: Even within the U.S. stock market, the largest in the world, there are sectors of companies that aren’t always easy to exit. This risk is even more common in emerging markets where sellers may not find many buyers at a given price. Choosing stocks of larger companies tends to reduce liquidity risk.
How to Buy Mexican Stocks
There are multiple ways to start investing in Mexico. The easiest by far is to buy an exchange-traded fund (ETF), which bundles a number of stocks or tracks an index. While offering diversification and a low barrier to entry, the downside to the ETF approach is that your returns may be lower than by investing in individual companies through a broker.
Step 1: Determine the Stocks You Want to Buy
Consider using a stock screener to filter a list of Mexican companies according to your investment goals. These might include companies within a given sector, companies that have been on a growth trend, companies that are paying a dividend or other criteria you feel to be important.
You may wish to diversify with several individual investments, betting on the Mexican economy as a whole.
Step 2: Pick a Broker
To invest in Mexico, you’ll need to partner with a broker that can execute trades on Mexico’s exchanges. You’ll find that one requirement quickly reduces the field of choices. Interactive Brokers is a great choice for investing in emerging markets and can complete trades on the Mexican Stock Exchange (BMV), Mexico’s largest exchange.
Interactive Brokers has several other plusses, including the company’s Trader Workstation (TWS), a full-featured trading platform that supports trades in over 100 worldwide markets and includes industry or company news, technical analysis tools and stock research tools.
Here are a few of our favorite brokers that allow you to invest in Mexican stocks.
Commissions$0.005 per share minimum $1 and maximum 0.5% of trade value; volume discount available
Account Min$0 for IRAs. Some accounts may require a minimum opening balance of $2,500
Step 3: Practice Trading in the Mexican Stock Market
Try before you buy.
The best online trading platforms offer a sandbox area where you can experiment without putting real money at risk. You can build a test portfolio — or several — and test one strategy against another or test your picks against a larger index, like the IPC, an index that tracks the Mexican stock market as a whole.
New to investing? This is an important step because it offers the opportunity to learn the ropes without the skinned knees that often come with beginning strategies.
Step 4: Begin Trading
Once you’re ready for real trading, you’ll need to fund your account. Typically, you can do this with an ACH transfer from your bank account. Expect a required minimum investment amount with many brokers and consider using an automatic deposit to keep building your investment.
Much like investing in U.S. equities, dollar-cost averaging can help you build a position over time without putting an emphasis on perfectly-timed stock purchases. If you’re a buy-and-hold investor, an account with automatic weekly or monthly deposits is ideal and helps you to add to your position over time.
Be mindful of trading costs when you begin trading. Buying or selling more frequently can result in more commissions paid to the broker and can eat away at your return. If possible, consider using larger and less frequent trades and also prioritize consistent investment amounts and intervals.
Mexican Companies to Watch and Future Market Outlook
Walmex, or Walmart de México, is the largest Walmart subsidiary outside of the U.S. and is the largest private employer in Mexico. Share prices have nearly doubled since 2015.
Shares in Cemex, the 2nd largest cement company in North America, are testing the lows last seen in early 2016. Is this the time to buy? It all depends on the type of investor you are, including your risk tolerance and willingness to research trading opportunities.
Mexico’s markets and stock values should continue to stabilize, ultimately rewarding investors who do the necessary research and those who have a steady hand.
While you choose your companies to target, you can still benefit from Mexico’s improving economic prospects through a number of ETFs, gradually moving to a portfolio customized to your risk profile and long-term growth goals.
Getting Started Buying Mexican Stocks
It’s impossible to time the market with 100% accuracy. Start and increase gradually when you start investing. Take your time in learning how to invest in stocks, ideally by using a test account. Make notes on what works and what doesn’t work quite as well — but also keep track of how your picks would have done if given a bit more time. You can take the lessons you’ve learned to your live trades and improve your overall skills as a trader.
Looking to expand your portfolio to include foreign companies? Learn more about buying foreign stocks, including how to invest in the Japanese stock market and everything to know about investing in the London stock exchange.
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