It appears that many investors are just sick and tired of standing on the sidelines and want to jump-start their portfolios. Just exactly how are they doing this with exchange traded funds (ETFs).
Traditionally speaking, in order to get big returns, one must be willing to stomach big risks. The renewed appetite for risk is especially apparent in emerging markets. This, despite the fact that many of these emerging economies are still very dependent on the United States.
With the continuing negative news that overshadows developed nations, many investors are hoping that nations like China, who are showing some signs of prosperity from government stimulus packages, will give them the portfolio boost that they much starve for. Since the sharp downturn in the markets in early March, investors have pulled $6 billion out of ETFs that invest in developed markets and have poured $3.25 billion into emerging market funds, states Gail MarksJarvis of The Chicago Tribune.
Before diving into the emerging market pool and banking on a huge return, all investors must keep in mind that they are risky. During the market downfall of 2008, emerging markets as a whole fell far harder than that of developed nations. A little bit of risk is always a good thing, but remember to keep your long-term investment goals at mind, do your homework and have an investment strategy; these all help mitigate and manage risks that come with investing.
Another way to lower risk is to utilize ETFs and potentially hedge your “risky” position. An ETF that will give you exposure to emerging markets is the iShares MSCI Emerging Market Index (EEM) which is up 26.6% for the year and has crossed 200-day moving averages.
For full disclosure, some of Tom Lydon’s clients own shares of EEM.
Kevin Grewal contributed to this article.
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.