Investing in the next frontier
“Countries like China are taking their place among the world’s big economies,” said Penelope Wang in Money. That’s good news for international investors, but it also means that “traditional emerging markets funds have lost some of their gunslinging appeal.” To take their place, so-called frontier funds have stepped in. “They go to places that have barely functioning stock markets and shaky governments but often have astounding returns.” Namibia’s market was up 63 percent last year, for instance, while Ivory Coast’s shot up 122 percent. But think twice before investing in T. Rowe Price’s Africa & Middle East fund or the Fidelity Emerging Europe, Middle East, Africa. Frontier markets are “as risky as they get.” Vietnam’s recently booming index, for example, is down 60 percent this year. For most investors, conventional emerging markets—“you know, sleepy places like India”—add just the right amount of spice to a portfolio.
Stay calm when markets panic
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Your brain reacts to plunging stock indexes the same way it does to any scary event, said Jason Zweig in The Wall Street Journal. “Merely reading the words ‘market crash’ in this sentence can instantaneously jack up your pulse and your blood pressure.” But when instincts tell you to flee, you can’t make smart investment decisions. “Fortunately, you can train your brain to stay calm when the markets are gripped by panic.” Try thinking of a stock that’s gone down 20 percent as an asset that’s now on sale. Do you want to sell it or buy more? Or imagine that a friend were in your situation. What advice would you give him? Another way to keep cool is by tuning out bad market news. “Because fear is as contagious as the flu, quarantine yourself from anyone who obsesses over the momentary twitching of the Dow.”
Give yourself a five
“Three years ago, I made a decision that changed my relationship with money,” said Marie C. Franklin in The Boston Globe. “I stopped spending, and started saving, every five-dollar bill that passed through my hands.” When the total cash in my “five pocket” hits $50, I put it into my savings account; when the account’s balance reaches $2,000, it gets rolled into a CD. This method doesn’t require a dramatic change in spending habits. Yet in three years “I have socked away $12,000 just by saving fives.” Fives are a good denomination for this strategy, since there are fewer in circulation than there are ones, 10s, or 20s. It only works, of course, if you tend to make purchases in cash. “You can’t get a five back if you’re always using credit cards.”
