What You Need to Know About Emerging Market Investing

What is an Emerging Market?
Eighty percent of the world's population - about 4.3 billion people - live and work in emerging market countries such as China, India, Brazil, Russia and many others. Emerging markets already account for about 40 percent of the world's economy (GDP), and for more than 75 percent of the world's economic growth each year!¹ Emerging markets are transitional economies that have embraced free-market reforms. Emerging markets contain a massive - and rapidly growing - number of middle class consumers. They all aspire to their version of the American Dream. Emerging markets have adopted many legal and economic reforms to qualify for participation in world trade and investment. For year to date and the past three, five and ten years, emerging market growth rates and market returns have been several times those of developed economies such as our United States.² Meanwhile, the average market volatility of emerging markets is much lower than many U.S. investors believe. In fact, since 1993, emerging markets have offered less volatility risk than either the S&P 500 Index^{^®} or NASDAQ.³

What is an Emerging Market?

Eighty percent of the world's population - about 4.3 billion people - live and work in emerging market countries such as China, India, Brazil, Russia and many others.
Emerging markets already account for about 40 percent of the world's economy (GDP), and for more than 75 percent of the world's economic growth each year!¹
Emerging markets are transitional economies that have embraced free-market reforms.
Emerging markets contain a massive - and rapidly growing - number of middle class consumers. They all aspire to their version of the American Dream.
Emerging markets have adopted many legal and economic reforms to qualify for participation in world trade and investment.
For year to date and the past three, five and ten years, emerging market growth rates and market returns have been several times those of developed economies such as our United States.²
Meanwhile, the average market volatility of emerging markets is much lower than many U.S. investors believe. In fact, since 1993, emerging markets have offered less volatility risk than either the S&P 500 Index^{^®} or NASDAQ.³

Cumulative Returns, Including Dividends Through June 30, 2009¹

	YTD	1 Year	3 Years	5 Years	10 Years
MSCI Emerging Markets Index	+35.66	-28.44	+8.61	+96.17	+83.97
S&P 500^® Index	+3.19	-26.20	-22.68	-10.71	-20.12
DJIA Index	-1.97	-22.97	-17.81	-8.1	-3.89
NASDAQ Comp. Index	+16.98	-19.13	-13.30	-6.67	-27.57

Risks

While emerging market risks certainly exist, DeGreen Capital Management, LLC, believes that the risks are often overstated here in the U.S. The U.S. perspective is often caused by a lack of familiarity with emerging markets, or to dated perceptions of these markets. Many U.S. investment advisors are not well informed in this area. It's not their fault. It's very difficult to remain fully informed in this complex arena. Yet, emerging market risks can be mitigated with professional, expert, investment management.

Nevertheless, several risks are commonly cited in the U.S. with respect to emerging market investing. You will notice that some of these risks may exist right here in the U.S., although - we would hope - to a lesser extent than elsewhere:

The risk of nationalization or expropriation of assets or confiscatory taxation;
Social, economic and political uncertainty;
Dependence on exports and/or the corresponding importance of international trade and commodities prices;
Less liquidity of securities markets;
Potentially higher rates of inflation (including hyperinflation);
Government decisions to discontinue support for economic reform programs and imposition of centrally planned economies;
Less stringent laws regarding the fiduciary duties of officers and directors and protection of investors

Should You Invest in Emerging Markets?

Emerging markets may offer you and your family an effective way to rebuild your investment portfolio, as part of your overall investment strategy.

But how much should you invest?

We devote Chapter Seven of The Emerging Markets Book to this subject. We encourage you to read it.

Remember the comparative performance and volatility numbers mentioned above. Your portfolio allocations should reflect your investment time horizon, your risk tolerance, and your overall investment objectives. Therefore, you may devote a greater or lesser amount of your overall portfolio to equity investing generally.

With these considerations in mind, we believe that up to sixty percent of the equity portion of your portfolio should be prudently invested in emerging markets - with DeGreen Capital Management - Your Emerging Markets Investment Advisor^™.

¹Source: IMF at purchasing power parity (PPP)

²Based on the year-to-date and the three, five and ten-year performance average through June 30, 2009, of the MSCI Emerging Markets Index vs. The S&P 500^®, the Dow, or NASDAQ indices.

³Ninety-day volatility of the MSCI Emerging Markets Index vs. The S&P 500^® and the NASDAQ indices, since 1993 through June 30, 2009.

What You Need to Know About Emerging Market Investing

Risks

Should You Invest in Emerging Markets?

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