Is now a good time to invest in emerging-market bonds?

The world is developing. This is great news for all of us who are a part of it, but it is especially great news for investors who want to grow their wealth. With emerging markets came the introduction of emerging-market bonds in the early 2000s. Ever since then, investors have been able to invest in emerging debt markets, providing them a unique opportunity to generate high returns but at the cost of a high risk.

However, 2020 has been a particularly more volatile year than usual. The COVID-19 pandemic frightened many investors into panic selling, causing the global market to temporarily tank. For investors with emerging-market bonds, this reached its low point in March of 2020. The rest of the market has largely rebounded since the initial panic, but emerging-market bonds are growing more slowly. This leaves investors scratching their heads wondering whether it is a good idea to invest in emerging-market bonds anymore.

Now may be a great time to invest in emerging-market bonds — but only if you have a very high risk tolerance

Volatility is nothing new for emerging-market bonds. They have never been for the faint of heart. They are vulnerable to volatile markets and can pay off high yields, but the risk of loss is too great for many. However, if you have room for risk in your portfolio, especially if you are young and saving for a long-term goal in the future, such as retirement, then you may be more comfortable with emerging-market bonds.

The solution for many investors is not to decide on whether to invest in emerging-market bonds but to decide on their level of risk tolerance. Then, they can work with a financial advisor who can help them determine whether they should invest in emerging markets as part of their overall financial strategy. 

Keep in mind that it never makes sense to take on any more risk than is necessary to help you achieve your goals. If the risk doesn’t add potential value, why take it?

Talk to a ProVise CFP® professional about your financial strategy

Do you have an interest in the potential high gains of investing in emerging markets? Or do you have a higher risk tolerance and just want someone to help you find the right avenues for your investments? At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can work with you to develop and maintain an investment strategy that aligns with your current financial circumstances, goals, risk tolerance and personal values.

We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.

Are you ready to talk to a professional about financial planning? Contact ProVise today to schedule a complimentary consultation.