Foreign stocks may offer value now because they performed so poorly last year; emerging markets might stand to gain the most because they’ve been depressed for so long.
Emerging markets usually include Latin America, Asia (with the exception of Japan), Africa, and Eastern Europe. Most investors who participate do so through mutual funds because it’s very difficult to research individual companies.
In 2000, the average diversified emerging markets fund lost more than 31%, according to Morningstar Inc., Chicago. One fund to consider is Matthews Pacific Tiger Fund (800-789-2742), which invests heavily in the Asian technology companies that were hit hard last year and earlier this year but may bounce back later in 2001.
Even harder hit were Japanese funds, which lost 35% last year. Indeed, the category of Japanese funds shows negative returns for the past five and 10 years, according to Morningstar, the only category aside from precious metals funds to do so. If you think Japanese stocks are so low they can only go higher, Morningstar gives its top rating in the category (four stars) to Fidelity Japan (800-544-8888), which suffered last year but gained 146% in 1999.
