What counts as an emerging market? Should you invest in them, and how do you even do so?
If you know anything about investing, you will know that emerging markets have been a big deal lately. Given all the fuss, you might feel obliged to sink some of your money into them.
And you probably should. The onward march of emerging markets has liberated hundreds of millions from poverty, and sparked a historic shift in wealth and power from West to East.
Who wouldn't want to invest in that?
But first, you need to know what you are doing, because the old investment mantra still applies in this brave new world: the higher the rewards, the greater the risk.
What are emerging markets?
The phrase emerging markets was coined more than 30 years ago, as a way of distinguishing developing countries against the rich, industrialised West.
It is applied to lands such as China and India, fast-growing economies that have opened themselves up to global capital, markets and technology.
These countries have expanded rapidly as they play catch-up with the West. Until recently, China's economy was routinely growing by more than 10% a year.
In the UK, we're pleased with growth rates of just 2% or 3%. In parts of Europe, any growth at all would be nice.
Why BRICs?
Four emerging markets stand out: Brazil, Russia, India and China. Together, they make a catchy acronym, the BRICs, coined by Jim O'Neill at Goldman Sachs in 1981.
These wildly different countries have been lumped together because they are all huge landmasses with vast populations that have trailed the West for centuries, and are a little bit annoyed by the fact.
Now they want to put it right.
Several factors give them an edge, including youthful populations, improving education systems, lower wages (which allows them to make things cheaply) and a growing middle class.
The need to pour hundreds of billions of dollars into infrastructure such as roads, railways and housing has also driven their economies forward.
China in particular stands out. It was recently forecast to become the world's biggest economy by 2020. Recent data suggests it could even overtake the US this year.
It is already the world's largest exporter.
The future is stamped Made in China. Or is it?
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How long can a good thing last?
Investors who bought into emerging markets early more than doubled their money in just a few years. But then the BRICs came crashing down.
The financial crisis was partly to blame, as demand from the West fell, hitting exports and damaging confidence.
This exposed underlying problems in emerging economies, such as corruption, property bubbles, political weakness and the growing gap between rich and poor (no, I'm not talking about the UK here).
Countries such as Brazil and India had to hike interest rates to prevent their economies from overheating, squeezing the life out of their economies.
Making the leap from an emerging to developing economy isn't easy. Japan and South Korea managed it. Many fail at the final hurdle.
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What has recent performance been like?
Over the past three years, the average fund investing in global emerging markets has delivered a total return of just 0.9%, which is frankly rubbish. You would have earned more money in a bog standard savings account.
[SPOTLIGHT]At the same time, developed countries got their Mojo back. Over three years, the FTSE 100 index of leading UK companies has grown 32%, while the US index grew 43%.
Is the future brighter?
Emerging markets have a lot on their plate right now.
The Chinese authorities are urgently trying to deflate a credit and property bubble. In Russia, Vladimir Putin's aggressive foreign policy risks costly US sanctions.
Brazil has to tackle a toxic combination of rising inflation, falling consumer spending, World Cup riots and a closely-fought election in October.
They can bounce back quickly, however. Just look at India. Last year, it faced a full-blown currency meltdown. Today, with a new government in power, investors are piling in. The Indian stock market is up around 20% in the last 12 months.
The best time to invest is before the recovery kicks in.
Should I invest today?
Don't expect to make a quick killing from emerging markets, those days are over.
Think long-term instead, and only invest money you don't expect to need in the next five to 10 years, to give you time to overcome future volatility.
Consider drip feeding your money into these markets, rather than paying in a big lump sum at once. And don't divert more than 10% of your funds in this area, to avoid getting over-exposed.
That should eliminate most of the risks.
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Where do I start?
Beginners could start with a global emerging markets fund, which reduces risk by spreading your money across all the main countries.
First State Global Emerging Markets, which invests in a string of countries including India, South Africa, Chile, Brazil and Turkey, has grown 20% over three years, and 90% over five years, according to Trustnet.com.
Fund managers Aberdeen, Fidelity and Lazard also boast successful global emerging markets funds.
Do you have anything more specific?
If you're feeling brave, you could opt for a fund investing in a single country. Invesco Perpetual Hong Kong & China and First State Greater China Growth have done well lately.
First State Indian Subcontinent and Jupiter India are both worth considering.
The Ukraine crisis has knocked Russian share values, so if you're feeling brave, now might be a good time to buy Baring Russia or Neptune Russia & Greater Russia.
If World Cup fever has gone to your head, try the JP Morgan Brazil Investment Trust.
Where do I buy these funds?
You can buy these funds cheaply and easily from a fund supermarket such as Bestinvest, Cavendish Online, Chelsea Financial Services, Fidelity FundsNetwork, Hargreaves Lansdown and Interactive Investor.
If you invest inside your annual Isa allowance, your returns will be free of growth and income tax.
Emerging markets aren't for widows, orphans, safety seekers, short-term savers, cautious investors, pensioners on low incomes or anybody of a nervous disposition. But for everybody else, they're too big to ignore.
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Disclaimer. Harvey Jones holds investment fund Jupiter India. He doesn't hold any other fund mentioned in this article.
Have you invested in emerging markets? What has been your experience? Is now a time to invest more or steer clear? Let us know your thoughts in the comment box below
More on investing:
Beginner's guide to investment trusts
Beginner's guide to stocks & shares ISAs
Beginner's guide to index tracker funds
Beginner's guide to Exchange Traded Funds
Beginner's guide to managed funds