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Thread: Latin America funds

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    Veteran Member jessica_rabbit's Avatar
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    Default Latin America funds

    What are yall's opinions on investing in international stock funds. Particularly Latin American funds. I understand that they are riskier, but the returns seem to be so much higher. Can this continue? I'm looking for a good way to diversify my investments. Any thoughts?

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    Banned Melonie's Avatar
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    Default Re: Latin America funds

    the vast majority of my current stock holdings are not American stocks (in fact, the only American stocks I'm holding now are oil, gas, and precious metal related).

    #1 - investing in any foreign stock which is priced in a currency other than the US dollar provides the potential for exchange rate gains or losses independent of stock performance. Right now the US dollar has resumed it's declining trend, so that foreign stock prices are rising for this reason alone

    #2 - the profitability of foreign companies is affected by local labor costs, local energy costs, local gov't policies, local costs of worker safety and environmental compliance etc. relative to worldwide competition. With particular industries in particular South American companies, their position is pretty favorable.

    #3 - many South American companies are dealing with commodities, which are in an upward price cycle right now. Thus companies producing oil, copper, ethanol, etc. are sitting pretty. Likewise for 'utility' companies, because unlike the USA where everybody already has a cell phone and cable TV there is still a lot of growth potential in South America.

    #4 - the biggest traditional investment risks with South American companies have been destabilization of the local currency, and sudden change in political regime/policy which vastly changes the 'rules of doing business' in that country. In the worst case, gov'ts have 'nationalized' foreign owned companies leaving the original stockholders with nothing. However, in today's world there is no chance that the USA is going to intervene militarily to convince a new 'el presidente' that nationalizing primarily US owned holdings could be bad for his health.

    #5 - on an overall risk vs return basis regarding a wide spectrum of stocks, many of the Asian countries would appear to offer a better equation than South America right now.

    IMHO (and this is not an invesment recommendation, only the personal opinion of a 'dumb blonde' with big tits) ... potential investors in a South American based mutual fund should look closely at the specific major company stock holdings in that fund. Just because a company is located in South America means very little. But if the majority of those South American fund holdings are involved in commodities and utilities, investing in such a fund would give the investor good potential returns based on high profits plus a chance to profit even more from a further erosion in the US dollar exchange rate.

    another IMHO ... if an investor knows enough to research the stocks held by particular mutual funds, they also know enough to bypass the mutual fund management fees and buy the South American stocks directly (or buying ADR's of South American stock shares that are listed on US stock markets).
    ~
    Last edited by Melonie; 04-27-2006 at 04:05 AM.

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    Default Re: Latin America funds

    The volatility of the governments keeps me out.

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    Veteran Member jessica_rabbit's Avatar
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    Default Re: Latin America funds

    Thanks Melonie! I always enjoy reading your posts. You've given me a few things to consider. Yes, I'm also looking into Asian markets. Foreign investing is new to me, but the potential for high returns makes it look very attractive despite the risk. I will certainly do some more research before making a move though.

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    Default Re: Latin America funds

    Have you considered Canadian Funds?

    I put some money in a Fidelity Canadian mutual fund and am happy witht he results so far.

    http://quicktake.morningstar.com/Fun...A&Symbol=FICDX

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    Default Re: Latin America funds

    Quote Originally Posted by jessica_rabbit
    Foreign investing is new to me, but the potential for high returns makes it look very attractive despite the risk. I will certainly do some more research before making a move though.
    You could opt to buy an all international fund if you wish to spread your bets around.

    I can see what you mean about Latin America though.

    http://personal.fidelity.com/product...html?315910844

    One thing that I will say is that a lot of the mutual fund companies have been clamping down on short-term trading of their international and sector funds by instituting redemption fees (the Fidelity fund I linked takes a 1.5% cut if you sell within 90 days), and in some cases purchase fees to make sure they keep such people looking to make a quick buck out. If you're looking to invest long term it won't be as much of a hassle, but some funds fee policies are stiffer than others, so make sure you shop around.
    Former SCJ now in rehab.

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    Default Re: Latin America funds

    here's some pro commentary regarding Latin American investment risk ...

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    Default Re: Latin America funds

    thanks again!

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    Default Re: Latin America funds

    One thing that I will say is that a lot of the mutual fund companies have been clamping down on short-term trading of their international and sector funds by instituting redemption fees (the Fidelity fund I linked takes a 1.5% cut if you sell within 90 days), and in some cases purchase fees to make sure they keep such people looking to make a quick buck out.
    ]

    Yes, these redemption fees / purchase fees definitely make it more difficult to consider investing in these sort of funds ... since they basically prevent you from selling fund shares within 90 days of purchase without 'losing' an additional 1.5-3% of your PRINCIPAL to these sort of charges. This definitely interferes with an investor's ability to minimize losses if/when conditions turn negative.

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