Financial Tunes

why is investing in emerging markets risky?

Investing in emerging markets such as China and Brazil is hot right now. The rates of return can be upwards of 30 percent or more? Why is investing in emerging markets risky? Why is investing in countries that have developed economies (i.e. Japan, Great Britian) with a long-run track record less risky?

Public Comments

1. They are never considered risky, its only long term investment, you have to park your money for 3-5 years at-least.
2. This kind of "risk" is a political statement. With a developed country, you have a legal system to depend on to keep the companies from defrauding you too badly. With a newer country, they have more freedom so a con artist might find a creative way to scam investors.
3. Because emerging market have high growth. High growth is risky. High growth can bring high inflation. Stable economy have lower risk. High risk means high return.
4. I think as the developed countries like US and UK etc have well developed and properly followed credit reporting and credit check policies/methods that is also a good reason why its more easy to take calculated risks while lending money and investing, whereas in developing countries these practices are not followed that well. Check this article and many other nice articles explaining in full detail http://www.distillingfinance.com/search?query=EMERGING+MARKET