Chart: Emerging markets can offer high returns. But don’t try to time it.

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Emerging markets are growing at a rapid pace. But moving in and out of the market can dramatically reduce your returns over time.

The perils of trying to time emerging markets

 

  • Emerging markets can offer superior growth, but high volatility. Emerging markets’ GDP is now the largest portion of global GDP, and it’s growing rapidly — more than 2.5x the growth rate in developed markets (excluding the U.S.).1 But with this high growth comes high stock market volatility.

 

  • Volatility may cause investors to try to “time” investments in emerging markets. But missing just a few of the best performing trading days can be costly. From January 2000 through January 2019, the total return for the MSCI EM Index was 235%.2 If you miss just the five best trading days in that period (out of 4,980 total trading days), the total return is almost halved to 122%. Miss the 24 best days, and the total return drops below zero.

 

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