Investors who want to participate in the growth of developing nations have several alternatives:
International mutual funds. Some diversified international funds now have a significant exposure to the developing world, including Asia (outside of Japan), Latin America, and Eastern Europe.
Specialized emerging markets funds. Such a fund can be added to a broad-based international fund, assuming you can devote more time and effort to managing your portfolio.
Regional emerging markets funds. You might invest in a Latin American fund, an Asia ex-Japan fund, and perhaps an Eastern European fund. This would result in a portfolio of funds that concentrate on certain regions, rather than relying on one fund that tries to follow all the world’s developing nations.
Emerging markets subaccounts in variable annuities and variable life insurance policies. Some variable annuities offer a guaranteed minimum annual return, for 10-year investors, so they may be good choices for taking the risks of emerging markets.
Closed-end funds. These funds, which trade like stocks, often trade at a discount to the value of the securities they hold. Aggressive investors might buy emerging markets country, regional, or worldwide closed-end funds when those discounts widen. That happened last year in Brazil and Argentina, when they had political problems, and this year India Fund’s discount has widened over threats of war with Pakistan.
