International markets offer a tradeoff of higher potential returns at the price of higher volatility, when compared to the U.S.
Emerging markets offer even higher potential returns, at the price of even higher volatility, when compared to both the U.S. and international markets.
While these characteristics are well publicized, emerging markets investments hold two additional benefits that are typically not discussed:
- Technology Leaps: The technologies developed in the U.S. and other developed countries are readily available to emerging markets, allowing for leaps to the newest technologies.
- Rotating Countries: The most advanced countries keep being replaced by less advanced countries in emerging markets funds. As long as there are countries that are not advanced enough to be part of emerging markets funds, we get a fresh supply of countries that can leap forward.
These benefits are the key for emerging markets investments sustaining a very high growth rate.Disclosures Including Backtested Performance Data