| Emerging markets funds have arguably been the | | | | in a mix of different funds. This will ensure that |
| growth phenomenon of the 21st Century. Led by | | | | your entire holding of funds will contain a balance |
| the powerhouses that are the Chinese and Indian | | | | of higher and lower risk assets, with money |
| economies all the emerging markets have seen | | | | invested all over the world and in different asset |
| unprecedented success, which has meant superb | | | | classes such as bonds and shares. Emerging |
| returns for investors too. | | | | markets funds can certainly provide an important |
| The social, political and economic factors behind | | | | and potentially profitable investment and for that |
| the growth of the emerging economies were not | | | | reason could form a vital part of your portfolio. |
| immune to the recent global recession however. | | | | However it is essential that you consider your |
| Growth slowed significantly, although an actual | | | | own attitude towards risk. That is, how would you |
| recession in these countries was never likely. | | | | react to a fall in the value of your investments? |
| Because of this strong grounding in economic | | | | Would you be comfortable knowing that you |
| growth it was the emerging economies that | | | | have invested for the long term and that short |
| enjoyed the fruits of a market recovery through | | | | term values don't concern you? Or would you |
| 2009. The numbers say it all: | | | | have sleepless nights worrying about whether you |
| In the last 12 months the MSCI Emerging Markets | | | | will get your money back? |
| Index went up by 72.9%. In the twelve months | | | | Knowing and understanding yourself as an |
| before that it went down by exactly 50%. In the | | | | investor will save you a lot of grief in the long run. |
| three twelve month periods before that it went | | | | If you invest in a mix of assets that is in keeping |
| up each time by 37.8%, 28.4% and 34%. | | | | with what you are happy with then you will be |
| It's easy to see how the higher return that this | | | | much more comfortable with your investments. |
| type of investment provides goes hand-in-hand | | | | So in considering whether you should invest in |
| with higher levels of risk that the capital values | | | | emerging markets it is more a question of getting |
| can also fall dramatically. This is the typical risk and | | | | the right balance of funds. In practice UK |
| return trade-off you would expect from a higher | | | | investors are most likely to be comfortable with a |
| risk investment i.e. the higher the risk the higher | | | | mix of bonds, UK equity, international equity, |
| the potential return. | | | | emerging markets and smaller companies funds. |
| Because of this it's important to get a balance | | | | How much you invest in each of these will depend |
| with your investments. The best way to put | | | | on you. |
| together a suitable set of investments is to invest | | | | |