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[quote=YVONNE,280325]Here is the article.

Source: New York Times.

Expensive Lessons in Emerging Markets

By PATRICK McGEEHAN
Published: April 6, 2008

INVESTORS in emerging-market funds have been scrambling to cope with widespread declines, but the situation has been particularly painful for those who poured money into China.

From Nov. 1 through March, the typical foreign stock fund fell about 16 percent, said Bill Rocco, a senior analyst at Morningstar. But during those same five months, most funds that invest primarily in China have lost up to 40 percent of their value, Mr. Rocco said.

Those steep losses are a reminder of how risky developing-country funds can be, said Mr. Rocco, who added that he does not believe most individual investors should be making bets on particular markets.

“If you’re one of those people who discovered China funds late last summer, it’s been pretty bad,” he said.

Diversified emerging-market funds provide plenty of exposure to foreign markets that have high growth potential with less risk, he said. Investors who just cannot resist the siren call of the latest country whose stock market is on a tear, Mr. Rocco said, should spread out purchases of single-country funds over several months to test their tolerance for sudden dips and to avoid plunging in at the peak.

That advice could have saved some of the billions that evaporated so swiftly in the last few months. According to Brad Durham, managing director of EPFR Global, a fund research firm, investors pumped $50 billion into emerging-market stock funds last year.

Almost all of it — about $45 billion — came in the last quarter, Mr. Durham said. That means the net inflow into those funds in three months was about double what they had previously received in a good year, he said.

Much of that money was chasing the higher returns available in those markets, but a lot of it was fleeing the troubles in the United States, including the declining purchasing power of the dollar, Mr. Durham said.

But as stock prices slid worldwide, the money flowed right out again. In the first quarter this year, emerging-market funds had net outflows of about $20 billion, he said.

This year, most of the action in emerging-market funds has been in those with the most exposure to commodity-rich countries like Russia and Brazil and to the regions of the Middle East and Africa, he said.

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