Writing in a recent column in USA Today, Jim Lowell, editor of Fidelity Investor stated that, “I want to stay invested in emerging markets where populations and consumers are growing, but the markets are selling off on eurozone fears.”
Anyone think it's smart to bet against the Chinese consumer?
With emerging markets growing during the Great Recession, that is shrewd investment advice, proven over time. With Europe in a negative growth period, Japan staggering through another lost decade, and the United States still struggling, emerging markets will continue to offer the best, if not the only positive returns. The growth of the consumer class in emerging markets will be the most significant investment trend of the decades ahead, according to Jim Jubak of MSN Money. Right now securities from emerging markets are priced at very attractive valuations.
Lowell also stated:
“No-load Fidelity Total Emerging Markets (FTEMX, quote), a new fund (launched in November), is run by one of the most seasoned, veteran managers of emerging market stocks and bonds, John Carlson. He runs the only tactically balanced emerging markets fund that I know of: currency to hedge currency and debt, debt to hedge stocks, stocks to outgrow the current fear-driven need for either hedge.”
Fidelity Total Emerging Markets buys dividend paying stocks and others from emerging markets. The dividend income component provides a foundation for the overall total return, which has been about 40% historically. Around 80% of the portfolio consists of securities from emerging markets. Of the holdings of Fidelity Total Emerging Markets, the great majority of assets are in stocks. For the remainder in debt instruments, enhanced dividend income is sought when the outlook is neutral. Diversity is achieved from buying stocks and bonds from a wide variety of emerging markets.
As with Fidelity mutual funds, it is a no load fund with modest expenses. That enhances the returns from the emerging market country securities for the investors. At present, Samsung (SSNLF, quote), Taiwan Semiconductor (TSM, quote) and Vale (VALE, quote) are among its biggest holdings. About 70% of Fidelity Total Emerging Markets is in equities, almost 27% in debt, 2% in cash, and 1% in preferred stock.