Although emerging markets are expected to rise in the coming decades, this will be a jagged line on the chart. Investments in different nations carry different risk levels, and choosing the wrong country to concentrate on can prove dangerous.
There's also the issue of whether to invest actively by buying and selling investments directly or to invest passively by buying shares in emerging-market mutual funds or exchange-traded funds (ETFs) managed by professionals. If you have the skills and knowledge to buy and sell wisely, then you may be able to avoid steep dips.
Using well-managed funds can expose you to dips but can moderate your losses. Also, you don't have to constantly monitor the often murky economic developments in nations where unstable governments (known as political risk) can threaten economic growth and sink your investments.
Whatever route you choose, you should consider using an advisor who's an expert in this highly complex and fluid investment area. And, as always, strive to exorcise the twin investing devils of fear and greed, which can lead you to buy high and sell low, wiping out gains.
Ted Schwartz, a Certified Financial Planner®, is president and chief investment officer of Capstone Investment Financial Group. He advises individual investors and endowments, and serves as the advisor to CIFG Funds. Because Schwartz has a background in psychology and counseling, he brings insights into personal motivation when advising clients on achieving their wealth management goals. Schwartz holds a B.A. from Duke University and an M.A. from Oregon State University. He can be reached at firstname.lastname@example.org.