cheapie

Fidelity manages our 401k. They have two emerging market funds which have been doing great over the last couple of years. I'm in them but want to learn more about them, specifically how risky they are.

i'm in Fidelity Emerging Markets (FEMKX) and Morgan Stanley Inst Emerging Mkts B (MMKBX). They've returned a ytd of 14.43% and 14.19% and have a 5yr avg return of 23.87% and 23.41% respectively.

Anything I should worry about?

__________________
70% of the world is covered by water. The rest is covered by Bob Sanders

Merlin

Emerging market funds tend to be more volatile (risky) than other funds. But beyond that there is not too much to worry about. It is a very good thing that you have a portion of your money invest in EM funds. The only thing to monitor is that since they have done so well that they don't become a disproportionately large part of your portfolio. So you should decide how much of your portfolio EM funds should be, 25% is probably a good number, and periodically rebalance to that. Rebalancing about once every three to six months should be fine.

As you noticed the EM funds have done quite well. Nothing goes up forever so make sure you manage the risk.

__________________

cheapie

have they done well because of the position of the dollar?

Merlin

That is a big part of it. Locally the markets have done well. Add to that a currency tailwind and you see the big numbers these funds have put up.

ray

Just some things that I personally like to look at when I'm researching Mutual Funds in no particular order:

Tenure/experience of the current fund managers
Morningstar Ratings and analysis (www.morningstar.com)
Top Holdings in said Mutual Fund

In regards to the 2 funds you mentioned Cheapie, the only thing I would be weary about is the fact that a majority of their top holdings are in Latin American firms. Though the argument could be made that Latin America has great growth potential, there is still the issue that their reporting standards aren't as strict or complete as what is required if their shares were listed on a US Stock Exchange (as an ADR or otherwise).

zippyjuan

I know little about emerging markets. I do watch out for investing in things that are considered to be "hot". Usually by the time people hear about them (or they have gone up enough to be considered "hot") they have already had most of their run up and are due to come back down relative to other things. In the past, whenever I tried to invest in what was hot at the time, I ended up losing money. Spreading out your investments is a good thing and if this is part of spreading out (not just making a comission for your broker/ advisor) then it could be a good thing as long as you don't put too much of your money into it.

__________________
I add new pictures to my photo gallery pretty regularly. You can see them here if you are interested: http://www.pbase.com/jeffryz

InfiniteNothing

not to mention the insane fees the emerging market mutual funds charge

cheapie

mine doesn't unless i trade within 90 days.

yippiekiyeh

High risk = high return or at least is what they say. We have fidelity managing our 401(k) also. Though our funds are different from yours. I've mixed up my contributions across the board.

__________________
Distributed.Net
I'm Trying this blogger thang...

InfiniteNothing

That's an additional unrelated fee so you don't "day trade". There are always fees for managing the fund. They run from like 0.5% for an index fund to about 2% for a emerging market fund. That 2% kills profit. Read the prospectus for the fund to find out what the fees are.

Yeah, that's a common misconception. High risk = high risk. No one knows what the return will be.

ray

High Risk = High Return is not always true, but it is safe to say that higher risk investments typically do have the potential to offer significantly higher returns than investments that are considered Low Risk.

Me personally, I have a good mix of Blue Chip stocks, high-risk tech stocks, and Mutual Funds that encompass various industries that I normally wouldn't invest in directly in individual stocks.

InfiniteNothing

Slot machines have the potential to offer significantly higher returns than low risk investment but I think what we have to look at is the expected value of the rate of return. A good slot machine would be like -0.05% expected rate of return making it a bad investment.

Kevster

Right now I have about 50% of my 401k in emerging market funds. I have another 35% in foreign funds and the last 15% in domestic funds. I re-evaluate my 401k and portfolio every month, and right now the 2 funds I have for emerging markets are doing very well.

__________________
I think over again
My small adventures, my fears.
The small ones that seemed so big,
For all the vital things I had to get and to reach.

And yet there is only one great thing, the only thing:

To live to see the great day that dawns,
And the light that fills the world.

-old Inuit song