Mythical Emerging Market Returns

The headline of a May article in Investment News, authored by senior columnist Jeff Benjamin, declares: “When investing in emerging-markets economies, stock picking beats indexed exposure.” As regular readers of my work will most likely not be shocked to discover, this assertion doesn’t reflect my own thoughts, nor is it supported by the historical evidence.

All in all, there was nothing particularly new in Benjamin’s article, which simply repeats the “conventional wisdom” Wall Street wants and needs investors to believe: that while indexing might be appropriate for informationally efficient markets (like U.S. large stocks), in informationally inefficient markets (like emerging markets), individual stock selection is the way to go.

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