Upbeat Report: Developing Market Funds

by Alan Lavine and Gail Liberman

Walter Frank, chief investment office of Moneyletter, a Holliston, Mass.-based mutual fund newsletter, is bullish on emerging market or developing market mutual funds.

These are mutual funds that invest in China, India, and other Asian countries, as well as Eastern Europe.

Be advised that developing markets are volatile and risky. You can experience double-digit gains and losses in any given year. You can win or lose more than 50 percent. So be sure to make a developing market fund just a small part of your holdings.

Developing market funds have performed well over the past couple years and are experiencing rapid economic growth. Frank expects more gains in China, India, Brazil, Russia and other Eastern European countries.

Developing markets, Frank says, are less volatile than they have been in the past. Besides the fact that their economies are growing rapidly, he says, currency reform has helped their stability.

One fund he favors is the T. Rowe Price Emerging Market Fund, which is well-positioned in China, India and Latin America. The stocks in these markets are cheap in relation to earnings.

He also likes the Fidelity Latin American Fund, Fidelity Emerging Market Fund and the Vanguard Emerging Market Fund.

In the United States, Frank’s six-month forecast calls for a growing economy and higher interest rates. Inflation, he believes, should be flat to higher. The values of the stock markets in the United States, Europe, Japan and Hong Kong, he says, should be higher.  

Alan Lavine and Gail Liberman are husband-wife personal finance columnists, journalists and authors. They are the authors of "Rags To Retirement," published by Alpha Books. Their columns appear in newspapers throughout New England and the Southeast, as well as online. Their commentary on mutual funds and personal finance is carried by 200 radio stations nationwide every Sunday over Business News Network's Charles DeRose Financial Advisor Show. Al and Gail’s new book is "Rags To Retirement:  Stories from people who retired well on much less than you think," published by Alpha Books.

More articles by Al and Gail can be found here.