Red chips, BRICs, frontier markets, and now dim sum bonds―at various times, all of these emerging market subsets have been touted as the next great investment idea for expats. After all, if emerging market economies could be expected to generally grow faster than their developed market counterparts, it would seem to follow that you could earn better returns by putting your savings in emerging markets than you could by sticking with developed markets―or so the thinking went.

Unfortunately, despite the large influx of funds into emerging markets, this theory has not fared well in recent times. For example, had you invested in iShares S&P500 ETF (IVV), an exchange-traded fund that invests in U.S. large-cap stocks at the beginning of the year, your pretax return including dividends would be 1.7% year-to-date. However, had you invested in iShares MSCI Emerging Markets ETF (EEM), an exchange-traded fund that invests in 21 emerging markets, the biggest being China, Brazil, South Korea, Taiwan, and South Africa, your pretax return including dividends would be -16.5% year-to-date.

So what's gone wrong with the emerging markets investment strategy? Quite possibly, it's really just a misunderstanding of what can - and cannot - be achieved. To help understand what's involved when you include emerging markets in your diversified portfolio, have a look at Michael Pollock’s article "Five Myths About Emerging Markets," which recently appeared in the Wall Street Journal.

Also take a look at "What You Need to Know About Investing," an article which may help you achieve investing success through building a properly diversified portfolio which includes but is not limited to emerging markets.

Creveling & Creveling is a private wealth advisory firm specializing in helping expatriates living in Thailand and throughout Southeast Asia build and preserve their wealth. Through a unique, integrated consulting approach, Creveling & Creveling is dedicated to helping clients cut through the financial intricacies of expat life, make better decisions with their money, and take the steps necessary to provide a more secure future. For more information visit http://crevelingandcreveling.com/.

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