Frontier Markets Definition

What Are Frontier Markets and Which Are the Best Funds to Invest in Them?

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Frontier Markets Definition and Examples

In investing, frontier markets is a term generally meant to describe countries that are developing markets but are less developed that emerging markets. In different words, frontier markets are typically smaller countries that are at least developed enough to be accessible to investors because there is enough economic structure to support capital markets.

The definition of frontier markets is broad and therefore, depending upon whose definition is being used, there are somewhere between 25 and 100 countries considered to be frontier markets.

Some examples include Argentina, Bahrain, Qatar, Kenya, Macedonia, Nigeria, and Vietnam.

In general, the market risk is higher for developing markets securities, such as stocks, bonds and mutual funds, than that of more developed countries.

The reason for this risk may be due to political risk or unrest, questionable accounting standards or unstable currencies. However, the higher relative risk is thought to translate into higher potential returns for investors.

Best Funds to Invest in Frontier Markets

There are only a handful of mutual funds that are purely frontier markets funds and the majority have high expenses or are inaccessible to everyday investors. Therefore there is only one fund that can be considered a low-cost diversified fund to invest in frontier markets and this fund is an ETF called iShares MSCI Frontier 100 (FM). Expenses are reasonable at 0.79%.

Disclaimer: The information on this site is provided for educational purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.