Emerging Markets: Time to Cave

Many people invest in an emerging markets fund as a way to diversify their portfolios and/or to play risky with a small amount of money in hopes of striking a large percentage return.

The US stock market can be a bit of a roller coaster sometimes, but from what I've experienced, emerging markets funds exaggerate the ride. With recent volatility boosting and shaving whole percentage points off indexes left and right, it can be a scary time for anyone's portfolio. So, when the Nasdaq plummets 2.6%, look at the charts of emerging market (EM) funds and see how they react. Because they tend to be more risky investments, EM's should play a smaller part in one's portfolio than, say, a blue-chip traditional growth fund. I think 3-5% is a good benchmark for EM funds in one's portfolio, given the current financial climate, however this is just my opinion, and it shouldn't be substituted for the advice of a financial professional. Depending on your portfolio size, your options can sometimes be limited in terms of mutual funds to invest in. Making judgement on where to invest can be a little more difficult, as a result. Of course, you don't have to invest anything at all if you don't want to... there are several banks that offer inflation-beating 5% APY savings accounts that come standard with absolutely NO risk and FDIC insurance. This is one of my favorite choices!

Emerging markets have skyrocketed in recent years, providing EM investors with sky-high returns. These investors need to take a step back and reevaluate their funds' portfolios. True it is difficult sometimes to perform market research on foreign markets, but one must find a way (Google, etc.) to get the information needed to assess one's holdings.

Remember! I'm not a professional and the opinions contained herein should not be substituted for the advice of a professional financial services representative.