Emerging market bond funds are not for the faint of heart. If you're willing to deal with the volatility, emerging market bond funds — made up of bonds from countries such as Russia, Brazil, Mexico, and Turkey — offer excellent return potential.
Fidelity New Markets Income Fund (FNMIX)
Contact: 800-544-6666; Fidelity
Type of fund: Actively run mutual fund
Types of bonds: Emerging market, mostly government, with some corporate issues; the majority are U.S. dollar-denominated
Average maturity: 12.7 years
Expense ratio: 0.87 percent
Minimum investment: $2,500
One of the first emerging market bond funds. In 1998, the fund lost 22.38 percent, and in 2008, it lost 18.24 percent. Most other years, however, the fund has seen impressive returns. Since inception, the annualized return has been slightly greater than 12 percent.
iShares JPMorgan USD Emerging Markets Bond (EMB)
Contact: 800-474-2737; iShares
Type of fund: Exchange-traded fund
Types of bonds: Emerging market, mostly government, denominated in U.S. dollars
Average maturity: 9.5 years
Expense ratio: 0.60 percent
Minimum investment: None
This fund has been a bit less volatile than the other emerging market ETFs available, which is why it's recommended, even though some of the other ETF choices are a wee bit cheaper.
T. Rowe Price Emerging Markets Bond (PREMX)
Contact: 800-683-5660; T. Rowe Price
Type of fund: Actively run mutual fund
Types of bonds: Emerging market, mostly government, mostly dollar-denominated
Average maturity: 10.7 years
Expense ratio: 0.95 percent
Minimum investment: $2,500 ($1,000 in an IRA)
Since 1994, this fund has lost money in only two years: in 1998, when it lost 23.1 percent; and in 2008, when it lost 17.7 percent. Overall, however, the fund has done quite well. Since inception, it has enjoyed an annualized return of just about 12 percent.
