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![]() The immediate drawbacks of emerging markets may be more obvious than their long-term virtues. ![]() The short term is another matter, though. Over the long term, this low correlation means that adding emerging market exposure to predominantly American investments can reduce the overall portfolio’s volatility and enhance returns. ![]() Numerous studies, including those by Vanguard and Morgan Stanley, show that over extended periods, the stock returns of emerging markets and developed countries like the United States don’t move in lock step most of the time. For investors, avoiding them means missing out on the possibility of greater growth and the certainty of greater diversification. They comprise an extraordinarily fuzzy and vast category, including seven of the world’s 10 most populous countries: China, India, Russia, Indonesia, Pakistan, Brazil and Mexico, plus a host of other economically and geopolitically crucial places, like South Africa, Taiwan, Turkey and Poland. ![]() Yet not investing in them may be riskier still. Putting money into emerging markets can be a tough decision for people worried about human rights and climate change, and it has always been risky. ![]()
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