Isa fund bargains: Countries with cheap stock markets (and how to buy them)

This chart identifies cheap stock markets - we explain why they offer big discounts and how to back them

As the chart shows, there are seven countries in addition to Britain whose markets are at all-time highs, most notably Germany, the United States and India.

According to Russ Mould, of AJ Bell Youinvest, the fund shop, there is an old stock market saying that you can have cheap share prices or good news but NOT both at the same time.

The countries whose stock markets are furthest from their previous record highs are Greece and Portugal, two nations that have been at the centre of the eurozone debt crisis. Greece, for example, has seen its economic output fall by a quarter since the financial crisis struck, while deflation is affecting companies' profits.

The Brazilian and Russian markets are also well below their peaks. This is partly because their economies depend heavily on sales of commodities such as iron ore, oil, gas and copper, whose prices have all fallen heavily over the past couple of years.

Another large economy whose stock market has a long way to go is Japan. Its main share index, the Nikkei 225, has soared over the past two years, largely thanks to a major injection of QE. A 62pc rise recently took the market to a 15-year high but it remains well below its peak of December 1989.

To shed light on this, Telegraph Money looked at the "Cape" ratios for all 25 countries on the chart, then compared their score today with their long-term average, which for the majority dates back to 1983.

Japan, Russia and China look to be three of the cheapest. Both Japanese and Russian shares are at a 40pc discount to their historical average. Japan scores 26 against 45 for its long-term average, although this includes the bubble years, while Russia has a rating of eight today, compared with an average of 13. China has a rating of 21, a 35pc discount to its average figure of 32.

But the biggest apparent bargains are Greece, 80pc below its long-term average, and Turkey, which is 50pc below.

But some markets that are at or close to record levels also look cheap on the Cape measure. Both Hong Kong and Britain are below their long-term averages, both scoring 15 against 21.

DYI Comments:  Vanguard's European Stock Index Fund (VEURX) is DYI's favorite spotting a 3.28% dividend yield far superior to the S&P 500 current rate at 1.96%.  However, one note of caution with the U.S. market so over valued any decline will pull down all markets including the European exchanges.  Dollar cost averaging only to average in for a lower cost basis when the U.S. market pulls down all markets.

DYI