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Jeopardy Question: What Was The Best Performing Equity Market In 2016?

Molly Goetz, CFP®, CDFA®

If you were thinking "What is Brazil?" you could claim victory over your opponents who might have scribbled down, "What is the U.S.?"

That might leave the audience scratching their heads as they recall some pretty negative news that came out of Brazil last year. Zika…Dilma Rousseff’s impeachment….favelas….deforestation….green swimming pools at the Olympics. Brazil had a tough year in many ways but its benchmark index was up over 65%.

What might be even more surprising is that the top 10 stock indexes in 2016 were all emerging or frontier markets. The MSCI Emerging Markets Index as a whole was up over 11% in 2016.

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You might say 2016 was a crazy year and this could be just one more example of that. Actually, nine of the 10 best performing equity indexes over the past 20 years have been in developing nations. Before you bet the farm on Emerging Markets, you need to flip the coin and look at all the 2016 data. The markets with the worst losses were also dominated by emerging markets.

If some emerging markets can do really, really well but some can also do pretty badly, do they have a place in the portfolio? Greenspring thinks so.

We believe in a globally diversified portfolio that has exposure to US, Developed and Emerging Markets. Your individual risk profile then helps us structure how much of your portfolio each of these equity components should comprise.

Final Jeopardy Question: What is "the only free lunch in investing"*?

Answer: "What is diversification?"


*Harry Markowitz, founder Modern Portfolio Theory