Global investing can help better diversify a portfolio. But all markets are not the same.
How are developed, emerging, and frontier markets different?
Morgan Stanley Capital International (MSCI) classifies foreign markets into three categories: developed, emerging, and frontier. A country might have an emerging stock market and a developed bond market depending on each market’s length of existence, size, and other factors. Countries may move from one classification to another as they evolve.
- Understanding the types of international markets can help you become a better investor in these markets.
- Investments outside the U.S. may provide opportunities that arise from fast-growing economies and markets.
- Investing internationally can help diversify a portfolio by adding assets that have risk-and-return patterns different from U.S. investments.
- International investments carry risks investors need to consider.
Foreign investments: Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility. These risks are heightened in emerging and frontier markets.
Wells Fargo Investment Institute, Inc. is a registered investment adviser and wholly-owned subsidiary of Wells Fargo & Company and provides investment advice to Wells Fargo Bank, N.A., Wells Fargo Advisors, and other Wells Fargo affiliates. Wells Fargo Bank, N.A. is a bank affiliate of Wells Fargo & Company.
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