Emerging market-focused exchange traded funds (ETFs) have been the topic of choice for investors of all walks of life lately. Jason Zweig for Money Magazine looks at the history of emerging markets for investors to think about before they jump in expecting hot returns. Here are a few reasons to take heed:
- The U.S economy grew faster in the 19th century than in the 20th, however the stock returns were not any higher. Likewise, Asia has grown faster than Latin America over the past 20 years, but Latin American stocks have done better.
- An academic report shows that over the long haul, stocks in the slowest-growing nations earn an average twice that of stocks in fast growing countries.
- Japan was the fastest-growing nation last century and produced the worst returns of any big stock market.
It’s difficult to make predictions, and past performance is no guarantee of the future. But by following an investment discipline and having an exit strategy, you can avoid getting caught in a downward spiral if something were to happen. The discipline can be applied to any holding, be it stock, mutual fund or ETF. It also works with domestic and global regions. Before making any investment decision, do the research on the ETF and make sure it fits in with your portfolio and investment goals. If adding emerging markets to your portfolio is a possibility, here are a few broad-based emerging market ETFs:
- iShares MSCI Emerging Markets (EEM) – up 17% year-to-date
- Vanguard Emerging Markets (VWO) – up 21% year-to-date
- BLDRS Emerging Markets 50 ADR Index (ADRE) – up 18% year-to-date
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.