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Keep a long-term outlook and remember the risks. It might be tempting for investors to equate rapid GDP growth with robust market performance, but experts caution that many times, that's not the case. "Investors often [have] this assumption that strong equity performance or strong fixed-income performance follows strong GDP growth, and while we've seen that over the last decade, it doesn't always hold," McDevitt says. Over the short term, McDevitt and Pursche say GDP growth has a relatively low correlation to market performance. That means even if economies such as China and India continue to grow rapidly, the market might not react to those gains immediately. With that in mind, Pursche recommends investors take at least a three- to five-year outlook. "Emerging markets are very, very attractive for a number of reasons and in our opinion, a component in a well-diversified portfolio," Pursche says. "But it does require a greater risk appetite because [emerging markets] are undoubtedly going to be subject to more volatility."
Twitter: @mmhandley
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