A recent article in USA Today recommends three mutual funds. Two are emerging market funds focused on international stocks. Surprised? You shouldn’t be.
Emerging market funds offer exposure to the countries that are growing the most. Emerging markets are even growing during the Great Recession.
David Snowball is the editor of of MutualFundObserver.com. He is also a professor at Augustana College. In the USA Today article, he recommends the SeaFarer International Growth and Income Fund (SFGIX, quote). This fund buys stocks for long term capital appreciation and current dividend income.
Snowball says he is voting with his feet. He has committed to invest in SFGIX “in the next couple of weeks.” His reason is Andrew Foster, who “performed brilliantly at Matthews Asian Growth & Income (MACSX, quote), which was the least volatile (hence most profitable) Asian fund for years.”
Foster can create a similar portfolio with Seafarer. According to Snowball, “This strategy makes sense, and Mr. Foster has proven able to consistently execute it.”
Seafarer focuses on dividend paying stocks. Emerging market funds that have dividend paying stocks offer several advantages over other stocks. The dividend income provides as much as 40% of the historic total return of a stock. Dividend paying stocks are also less likely to be fraudulent.
Emerging market funds offer the best of the international community of investments. Europe is in a recession and will not recover soon. Japan has been in “The Lost Decade” for well over ten years. It is easy to imagine Europe or the United States joining Japan. After all, stock market returns have been flat in the United States for well over a decade now.
Professor Snowball has a good recommendation and the right idea. Emerging market funds like SeaFarer International Growth and Income Fund offer the best upside in the years to come.