What is an Emerging Markets Fund?
An emerging markets fund is a fund that invests in the securities of companies and governments in developing countries.
How Does an Emerging Markets Fund Work?
Emerging markets have lower per-capita incomes, above-average sociopolitical instability, higher unemployment, and lower levels of business or industrial activity relative to the United States; however, they also typically have much higher economic growth rates. China, Brazil, South Africa, Russia, and India are examples of emerging market economies, and emerging markets funds primarily invest in securities from countries like these.
While emerging markets (and thus emerging markets funds) carry higher risk than the average investment, the potential for rapid economic growth in emerging countries means a higher return potential. Emerging market funds can be very attractive to any investor who wants to cash in on quickly growing countries due to their diversification. This diversification can mitigate much of the risk of emerging markets, and the emerging markets fund's typical practice of investing in a variety of countries can further mitigate this risk -- an underperforming investment in one country is unlikely to affect the performance of investments in other emerging markets.
Why Does an Emerging Markets Fund Matter?
Emerging market funds offer higher growth and investment return potential than can be typically found in the United States. However, the markets also carry a much higher risk. By putting money into an emerging markets fund, investors are able to easily invest in these lucrative markets while mitigating some of the risk through diversification.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
The Semper Augustus was a beautiful flower. It had midnight-blue petals with a pure white band at the tips and crimson flashes. According to Mike Dash in his book, Tulipomania: The...Read More →
Warren Buffett has been extolled as one of history's greatest investors and the returns...Read More →