3. Consider emerging markets.
Emerging markets account for 42 percent of global GDP, 23 percent of the global investable equity universe and 10 percent of the MSCI All-Country World Index. That is why investors cannot overlook the sector's vast potential.
The average investor has around 5 percent allocated to the area. "It should be higher given the value of opportunities that exist in the asset class," he explained. But many investors are nervous about economic certainty. And for good reason. Emerging market investments have been stuck in a long bear market, and for many professionals the asset class has become "the big short."
Despite big risks, it may be time to look for opportunities. Brandes has always found big returns in developing nations. He was one of the first investors to buy stocks outside of America. One of his first was Teléfonos de México, now Telemex, which he bought in 1983, reaping huge profits on the stock over the last 40 years.
He was an early buyer of many other developing nation stocks as well, including Jardine Matheson and Hopewell Holdings, both Hong Kong–listed holdings with significant exposure to China.
Brandes actually sold off many of his emerging market investments around 2009, well before people started rushing out of these nations, as they were getting expensive, he said. But now he's buying. In 2011 he had less than 2 percent of assets in emerging markets in his Brandes Global Equity Fund. That's increased to nearly 20 percent today.
One country that's looking particularly attractive is Brazil. Headlines of impeachments and economic woes have made many stocks cheap. Yet there are still good global operations. For instance, he likes Embraer, a Brazilian aerospace company that competes with the struggling Bombardier and is doing well internationally.
He also likes Brazilian banks and food companies. His firm currently holds Banco Bradesco, a well-capitalized bank and leading player in the Brazilian insurance industry, and Cia Brasileira de Distribuicao, a onetime pastry shop that's grown into the largest food retailer in Brazil.
While he admits that the news out of the country isn't great — its GDP is shrinking by around 3.8 percent, its president is facing impeachment — he's over-allocating assets to the nation. "[Our stocks] have done extremely well this year," he said. "The market got too low, but it's coming back."