With emerging markets mutual funds outperforming all other fund categories in the year-to-date, is it time to jump back into the roller-coaster developing nations sector? Maybe, say experts, if you have a strong enough stomach to tolerate the dizzying volatility inherent in the sector, and if you plan to invest for the very long term…
As a group, the funds have handed investors around 8.93% on average since the beginning of the year, but Bill Rocco, an equity analyst with Morningstar, believes that this could be down to the tumble they took last year. At the end of 2000, the 173 emerging market stock funds tracked by the research firm took a serious haircut, ending with just $14.7 billion in their coffers, down from $22 billion the previous year.
Fund followers believe that the deciding factor as to whether emerging market funds do well this year could be the United States - when the US economy catches cold, stock markets in emerging economies have a reputation for coming down with flu, nasty tickly coughs, and pounding headaches that require several days in bed, and lately the United States has been sniffling ominously.
However, some fund analysts and financial planners believe that for adventurous investors, the growth potential of emerging markets mutual funds is too good to pass up. 'This year could well be a good year for emerging market equities' according to the MD of Credit Suisse Asset Management, Richard Watt, who predicts that the emerging markets sector will bottom out in early spring, then bounce back nicely.
Experts advise, however that investors interested in emerging markets should take a long term view, making sure to diversify across countries, and should not usually dedicate more than 5% of their portfolio to the sector. Ladies and gentlemen, please keep your hands inside the car at all times. The ride is about to commence…
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