Some Thoughts On Emerging Markets

Emerging Markets have been performing awfully lately. And by lately, I mean the last six years in which little progress has been made. To make matters worse, there was a huge opportunity cost of having capital allocated away from U.S. equities.

After six years of sideways movement, Emerging Markets are beginning to really move again, only in the wrong direction. Take a look at July’s performance, courtesy of Dimensional Funds. You’ll notice virtually no country was spared.

Neither was any size or style.

Or sector.

So what do we do now with Emerging Markets? That obviously depends on what sort of investor you are, what your holding period is and all the other usual caveats. For investors committed to a diversified portfolio, understand that you’ll never hold enough of what’s going up and you’ll always hold too much of what’s going down. For broadly diversified portfolios, dealing with a lousy investment is a feature, not a bug.