10 Questions to Ask Your Financial Advisor about Investing in Frontier Market

If you are considering investing in frontier markets, the proverbial rubber hits the road when you sit down with your financial advisor and begin working on a plan. You should begin by asking your advisor some or all of the following questions.

How much exposure do I already have to frontier funds?

Answering this question means taking stock of the amount of frontier equities in your current holdings such as global funds since they have different weightings of different countries. It also means checking your equity holdings and even your online trading account.

If I already have exposure to frontier markets, can it be expanded within the same investments rather than buying another fund?

Answering this question may mean increasing your contributions to an existing global fund rather than taking on another investment asset.

Are we both comfortable with the country weightings of any global funds in my portfolio?

Country weightings vary between funds. Be sure you know where your investments are.

What are the ratings of the global or frontier funds in which I am already invested?

Ask your advisor about Morningstar ratings of your funds.

What is the feasibility of liquidating some of my emerging market holdings to provide the necessary cash for investing in frontier markets?

And where applicable, what are the tax implications of taking that step?

Have we taken steps to arrange my investments in such a way that there would be no reason to liquidate my frontier markets holdings in an emergency?

We suggest that the dollars put into frontier funds be money that you can set aside for between 5 and 10 years. Ensure that these dollars are not your "rainy day" or emergency dollars.

If I have not previously had any emerging market investments, and given my risk tolerance, would I be better to start with an emerging markets holding and then move to frontier markets when I have reached a comfort level?

Some emerging markets investors approach frontier investing more comfortably after a rewarding experience with emerging markets.

Under what circumstances should I put more cash into my frontier markets holdings?

You may come into unexpected money, such as an inheritance or legal settlement. You had probably not budgeted for it, so if feasible, sock it away in frontier funds.

Have we calibrated my frontier markets exposure with my risk tolerance?

Before you get to this stage, your advisor has likely assessed your risk tolerance and has discussed it with you.

Have we clearly discussed the difference between risk and volatility?

Risk is the possibility of losing all or part of your investment in a given asset and the potential impact of that loss. Volatility is the tendency of an asset to rise and fall dramatically.

Understanding the difference between the two aspects of investing will go a long way towards alleviating any worry you may have about your investments.

  • Add a Comment
  • Print
  • Share
blog comments powered by Disqus
Advertisement

Inside Dummies.com

Dummies.com Sweepstakes

Win $500. Easy.