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Frontier markets are underdeveloped emerging markets with potential for future development. They can be a risky investment but have substantial long-term potential. Investors should diversify their investment risks and evaluate the markets and political situations closely. Examples include Bangladesh, Lebanon, Mongolia, Nigeria, Argentina, Vietnam, and Slovenia. Thorough research is recommended before investing.
Frontier markets are underdeveloped emerging markets in countries with economies lagging behind the industrialized world, but with potential for future development. The concept of frontier markets was developed by the International Finance Corporation (IFC) in the 1990s to describe a specific subset within the larger group of emerging markets. People can participate in trade with these markets, and several stock exchanges have frontier market indices designed to track performance in these markets.
Emerging markets are generally fast-developing economies with explosive growth potential. Nations can encourage the development of emerging markets in a number of ways, including strong promotion designed to attract foreign trade and investment. Within emerging markets around the world, small markets with low liquidity and low market capitalization are considered frontier markets.
As a current investment, many frontier markets perform very poorly. They lag behind other markets on most stock market performance indices and can be volatile. However, in the long term, they have substantial potential. Investors may choose to engage in a frontier market with the aim of reaping rewards in the future. Investing in these markets requires the ability to invest for the long term, as people can suffer losses trying to liquidate investments in frontier markets before these markets have fully matured.
Also known as pre-emerging markets, frontier markets can be a risky investment. People interested in these markets generally diversify their investment risks to ensure access to liquidity when needed and to avoid losses caused by concentrating investments in limited sectors. When investing in frontier markets, people often evaluate the markets and political situations closely in order to make an informed decision about where investments could be safest.
In 2010, 30 to 40 markets were considered borderlines, depending on which index is followed. Some examples include Bangladesh, Lebanon, Mongolia, Nigeria, Argentina, Vietnam and Slovenia. Several mutual funds designed for investments in frontier markets are available for investors interested in getting involved in them, and people can also invest independently. It is recommended that you thoroughly research and leverage information published in financial journals and other financial publications to make the best possible investment decision. Even with careful research, it is possible to lose investments in these markets and people should allocate their investments wisely.
Asset Smart.
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