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Investing in Frontier Markets the Easy Way

July 21, 2008 – Comments (0) | RELATED TICKERS: FRN

   Author:  The Geared Investor        
        

Want to get in on something before it becomes big?  How about if you knew to invest in Yahoo! on that beautiful morning of April 19, 1996.  You wouldn't need to read this website at all, or you would have one of your butlers in Italy read it for you.  But since that didn't happen to the average person, we have to look for reality investments.  

I'm a huge fan of emerging markets and for the first time, there is now an ETF offered by Claymore that is based on frontier markets.  Released on June 12, 2008, the frontier market ETF under the symbol of NYSE:FRN still has plenty of time to prove itself.  This ETF is invested in American depository receipts (ADR) or global depository receipts (GDR) that are in the following countries: 

Bahrain, Jordan, Kuwait, Lebanon, Oman, Qatar, United Arab Emirates, Egypt, Ghana, Kenya, Malawi, Mauritius, Morocco, Nigeria, Tunisia, Zimbabwe, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Kazakhstan, Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia, Ukraine, Bangladesh, Pakistan, Papua New Guinea, Sri Lanka, Vietnam, Peru, Chile, Colombia, Ecuador, Jamaica, Panama and Trinidad & Tobago

Directly from the Claymore website, the folding countries and percentages were the holdings in the index:

Poland 25.0%, Chile 21.0%, Egypt 17.1%, Kazakhstan 7.8%, Peru 5.3%, Czech Republic 5.2%, Nigeria 3.4%, Lebanon 3.2%, Pakistan 3.0%, Oman 2.4%, Columbia 2.3%, Croatia 1.8%, Bahrain 1.4%, Georgia 0.7% and United Arab Emirates 0.5%

But what the heck is a depository receipt? Since I honestly cannot describe in any better myself, I will lead you to a great description found here.  Think of it as a large mutual fund of foreign companies that are allowed to be traded on United States stock markets after a whirl wind journey that has to finally be approved by the Bank of New York (BNY).  

If you're a young, savvy investor, you might want to get in now if this is something you feel can diversify your portfolio.  If you're older and don't have any clue if this is what you want, I would keep an eye on the chart. Another portfolio that is focused on the middle east is Poweshares MENA Frontier Countries Portfolio (PMNA) that was also just created and hasn't had time to be tested. 

The Claymore Frontier Markets fund is just another piece in the puzzle toward creating a well rounded blend between risk and reward.