For the past 10 years (through April 2012), mutual funds investing in emerging markets returned 11.39% a year, on average, according to Morningstar. That’s among the best of all fund categories and more than twice the 5.25% annualized return of domestic stock funds.
Going forward, can this superior performance be repeated? Perhaps, according to a recent report from Citigroup. The financial giant believes that developing Asia and Africa will be the world’s fastest-growing regions, driven by population and income growth, followed by the Middle East and Latin America. The countries that support market economies are likely to prosper.
The following countries are projected to have the highest growth, which might lead to higher stock prices for their companies:
* Emerging markets. China, India, and Indonesia are widely recognized as countries on their way to industrialization.
* "Tweeners." Egypt and the Philippines also are classified as emerging markets. Still, their companies have received little attention from international investors and emerging markets funds. That could change in the next decade or two.
* Frontier markets. Bangladesh, Iraq, Mongolia, Nigeria, Sri Lanka and Vietnam generally have not had much appeal for investors. If they move out of the frontier to the emerging markets category, that could change.
There are many funds for investors who wish to participate in the growth of emerging markets, and a few funds for investments in frontier markets. Moreover, if you want to invest in not-quite-emerging markets such as Egypt and the Philippines, some frontier funds may have some holdings there.
