Emerging Stock MarketsIf you're an investor looking for rapid growth, emerging stock markets may be the opportunity you're looking for. Emerging stock markets by most definitions would include China, Brazil, India, the Pacific Rim (without Japan), Russia, and Latin America (aside from Brazil). These markets are high growth but also extremely volatile and high risk. If you have a weak stomach, emerging stock markets may not be for you. To understand the types of returns that are possible, in January 2010 the BRIC 40 ETF (BIK) which invests in Russian companies, had a year to date return of nearly 82%. The China large-cap ETF GXC had a year-to-date return of 65%. Since these areas are experiencing explosive growth not seen in mature companies like the US, Europe, or Japan, returns can be through the roof. But, so can losses, at least over the short term. In short, emerging stock markets offer possible high returns, but carry high risk because they're in young, developing economies and may also be in regions of political instability. Foreign markets may also be subject to corruption. When investing in these countries, you can invest in individual companies. Many are traded on the New York Stock Exchange. For example, you can buy shares of China Mobile Limited (CHL), PetroChina (PTR), or the ICICI Bank of India (IBN). But trading individual stocks in mature markets like the US or Europe is risky enough, if you want to try and take advantage of growth in these countries you should consider an exchange traded fund. At least in that case, you will have diversity spread over a large number of countries. A reasonable level of exposure is about 20% of your portfolio in emerging markets. So, if you're interested in emerging stock markets, look into an exchange traded fund or a mutual fund, to at least give you some cushion against losses with a diversified portfolio.
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