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Morningstar's Guide to Investing in Emerging Markets

SPECIAL REPORT WEEK: Want long term growth? Invest in emerging markets. These economies offer the potential for great returns but watch out as they come with risks

Emma Wall 13 July, 2015 | 8:54AM

Greece is an emerging market.  A perfect storm of overspending, over-borrowing and a broken banking system has led to first index giant MSCI downgrading the country from developed market classification to an emerging economy in 2013, then S&P Dow Jones Indices followed suit last September.

Thanks to the downgrade, cautious investors were forced to sell any exposure they had to Greece, including institutional investors of pension funds and developed market equity fund managers.

Now, Greece makes up a – very small – proportion of a new group of countries, the emerging markets. But what is an emerging market? Unfortunately for those trying to get their head around emerging markets, there's no universally embraced definition of what constitutes an emerging, or developing, market. Classification systems vary widely between indexers and benchmarks.

But broadly these countries have a growing middle class, with an increasing disposable income – which is then spent on products from domestically listed companies, pushing up local stock markets.

They are often commodity rich too – whether it be traditional natural resources such as metals and energy sources or rich in human commodity thanks to the size of their workforce and innovative technology industries.

While emerging markets are grouped together by their potential to grow, not all emerging economies will achieve that end at the same rate. Before the global recession emerging ecomonies’ stock markets were more correlated, moving up and down as one. Now they are more divergent, making it increasingly important for investors to make savvy decisions.

All this week we shall be identifying just what an emerging market is and which hold the potential to grow exponentially - boosting your investment portfolio. Even those nations with the best prospects will be volatile, so be prepared to stomach a bumpy ride in your bid to profit.

Monday: Education

What is an emerging market and why should you invest?

What is an Emerging Market?

What is a Frontier Market?

Who Should Be Investing in Emerging Markets?

What is Going On in China?

Tuesday: Global Emerging Market Opportunities

Where in the world are the best growth stocks?

Where in the World are the Cheapest Stocks?

Frontier Markets Begin to Emerge

Top Emerging Market Investor to Replace Mark Mobius

Greece: Back from the Precipice for Now

Wednesday: Emerging Europe, Middle East and Africa

Investors don’t have to travel far for emerging opportunities

Should You Invest in Africa?

3 ETFs for Emerging Europe, Middle East and Africa

Want Investment Growth? Look to the Middle East

Will Rising US Rates Damage Emerging Market Returns?

Thursday: Emerging Exposure through Developed Equities

More than 70% of FTSE 100 revenues come from outside of the UK

3 Global Income Funds with Emerging Market Yield

Should Investors Be More Worried About Greece or China?

3 Top Rated US Funds with Global Profits

UK Equities Profiting from Emerging Markets Growth

Why is the Chinese Stock Market So Volatile?

Friday: Portfolio Planning and Pensions

Making emerging markets right for you

Avoid Emerging Markets Traps for Portfolio Success

3 Emerging Markets Funds for Your Pension

How to Save for Retirement

How to Invest Post-Retirement

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Emma Wall  is former Senior International Editor for Morningstar

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