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Overseas investments carry risks

Specialized Funds

What Region Is Best for Emerging Market Mutual Funds

Daniel Cross Nov 12, 2015

With a stock market that is on pace to post its ninth consecutive year of gains and, by some measures, looks a little expensive, it’s a good time to reconsider the potential of international mutual funds. They tend to come with a higher degree of risk, but also provide added growth potential and can help reduce overall portfolio volatility.

In case if you are wondering whether mutual funds are right for you at all, you should read why mutual funds, in general, should be a part of your portfolio.

Emerging Markets to Explore

2017 has been a different story. Emerging markets have been rallying strongly across the board. Even countries with major political problems, such as Brazil, which has been mired in scandal as its top government officials have been accused of bribery and corruption, are posting solid gains. With the exception of Russia, every single-country ETF has posted gains on the year, with many returning over 20%. Fueled by stronger growth prospects and attractive valuations, investors have poured billions of dollars into emerging markets funds, making them some of the marketplace’s hottest investments.

The New Emerging Markets Paradigm

India is another country on the emerging market’s radar. This country has two things going for it right now: income growth and population growth. Increasing consumer spending along with a growing presence in the tech industry should continue to make India one of the fastest-growing economies in the world. You can check our India section to explore more funds focused on India.

On the flip side, Russia has been perhaps the biggest drag on the world economy. Russia is heavily involved in the oil industry, a space that has struggled with low energy prices for much of the past three years. High inflation rates and tougher economic sanctions imposed by the United States have further contributed to the nation’s struggles.

Navigating the Emerging Markets Mutual Fund Space

Emerging markets bond funds provide a similar enhanced return potential for fixed-income investors. The T. Rowe Price Emerging Markets Bond Fund (PREMX) is a popular fund in this space that has historically delivered above-average returns with below-average risk.

Check out our Complete Guide to Mutual Fund Expenses and learn if you are paying too much on them.

The Bottom Line

Be sure check our News section to keep track of the recent fund performances.

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