Emerging Markets and Asset Allocation

Emerging market investments are great options for use in asset allocation investment programs. Many asset allocations only look at "international" investments,like Europe and Asia, but they do not use emerging markets.

This can be a costly mistake, as asset allocation depends on using investments that are not correlated to each other. Most developed international investments (like Europe, Far East, Asia, etc) behave in a like manner. If the market goes up they all tend to move the same way. But with emerging market investments (ETFs, mutual funds, commodities, hedge funds), you may find that those markets move in opposite direction.

In 2008, this would have helped investors as most international returns were down. Many over 50% (including China). Having these investments in your portfolio would not have benefited you much. Astute investment advisers, however, may have used a certain percentage of emerging market securities in their allocations. And depending on their selections, returns would have fared better - probably still losses, but higher returns nonetheless.