By Paul Goodwin, Editor of Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 2/10/11 Sign up for free Cabot Wealth Advisory
If you know almost nothing about emerging market stocks, you know that they come with high risk attached, including political risk, corruption, structural weakness and currency exposure.
But for some investors, even emerging markets are too tame, and for these people the lure of frontier markets can be strong.
A frontier market is one that hasn’t yet achieved the economic development, transparency or free flow of capital to qualify as emerging.
Want an example? Well how about Egypt?
Egypt has been dominating headlines for weeks, and if you want to see what political turmoil looks like when you translate it to investing, you can check out the Market Vectors Egypt Index (EGPT).
The chart shows a nice rally that began in July, and continued through to the end of 2010. But then the protests started and the ETF plunged from 20.5 to 16 in less than two weeks.
The chart also shows that many investors considered this an oversold level and bumped the issue back up to the 17.5–18.5 range, where it has been trading for almost two weeks.
You can see every news story reflected in the intraday chart of EGPT, including the rumor that came out on Thursday at a little after 10:00 that Mubarak would step down soon. That story pushed the ETF from 17.5 to 18.4 in about 20 minutes.
The Egyptian market doesn’t have many substantial stocks, and the ETF is dominated by one bank and one telecom.
But if you can’t get enough action from emerging markets, EGPT will give you all the frontier market action you can handle.
Editor’s Note: Paul Goodwin is the editor of Cabot China & Emerging Markets Report, which Hulbert Financial Digest rated as the #1 newsletter for five years in 2009 and 2010. During that time, the Report rewarded subscribers with a jaw-dropping return of 154% (an average annualized gain of 20.5% every year) versus the Wilshire 5000’s gain of 15% over the same period. Don’t miss another winning recommendation. Get started today!
Paul Goodwin
Emerging Markets Specialist, Analyst and Editor of Cabot China & Emerging Markets Report
A researcher and writer for over 30 years, Paul Goodwin has been a member of the Cabot investment team and editor of
Cabot China & Emerging Markets Report since 2005. Under Paul’s stewardship, Hulbert Financial Digest rated Cabot China & Emerging Markets Report the number-one-rated newsletter of 2006 with a 78.6% gain for the year, the number-one-rated newsletter of 2007 with a 74.1% return, and the top-performing investment adivsory for five years with a 17.9% annual return.