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The Best New Frontier Index

Posted June 13, 2008

“They are individually too small for institutions to invest in, but cobble them together in a new index that allows you to buy and sell the basket and… well, then you have something.” — Chris Mayer

by Chris Mayer

Baltimore – (TFN): When the stock market turns ugly, the quest for “non-correlated assets” intensifies. A non-correlated asset is fancy Wall Street talk for something that doesn’t move lock-step with the overall market. When the market falls, a non-correlated asset might actually rise, or at least hold its own better than the market.

Gold is a classic example. Its price tends to rise during times of stock market distress. But very few investments can rival gold’s long history of non-correlation. Impostors abound. The impostors might move independently of the overall market for months or years at a time, thereby creating the impression that they are non-correlated. But when the markets really turn nasty, investors often learn that their “non-correlated” asset tumbles just as sharply as an S&P 500 Index fund.

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However, some investors think they’ve found a reliable new non-correlated asset: “frontier markets.” Merrill Lynch recently created a new frontier index not only to track them, but for investors to buy and sell them.

Frontier markets include Pakistan, Kuwait, the United Arab Emirates (UAE) and other markets throughout Africa and the Middle East. They also include Vietnam, Kazakhstan, Cyprus and others. They are individually too small for institutions to invest in, but cobble them together in a new index that allows you to buy and sell the basket and… well, then you have something. Read on to learn which frontier indexes are the best investment.

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Posted by TFN-International · Filed Under International Investing 

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