Vietnam ETF presents risky opportunity with big potential rewards
At the start of 2013, Zacks.com, a leading investment research firm focusing on stock research, reflected on the past trading year, naming the exchanged traded funds (ETFs) that disappointed investors by offering lower-than-expected returns.
Among the selections was the Market Vectors Vietnam ETF (VNM), which is comprised of 34 Vietnamese securities and has exposure to the United Kingdom and Thailand. The publication indicated that lagging economic growth due to a "weak export market" and "low domestic consumption" was the primary cause of its lack of performance.
However, just a few months later, Zacks.com is reexamining the VNM, saying that the country's equities are gaining a great deal of strength due to government financial reforms and growing investor confidence.
"Vietnamese stocks continue to shoot up on the back of the country's economy gaining strength and are still valued low. These stocks have not only provided investors with plentiful profits, but are also pretty inexpensive compared to certain sectors," the organization's research team wrote in an April 2 article.
The publication noted that this ETF may be of particular interest to investors who are looking to take an aggressive approach with their portfolio. Due to the Vietnamese economy's growth potential, rising disposable income and a competitive manufacturing base in close proximity to China, the source says it could be worth consideration.
Still, the report maintains that volatility is likely to be a problem with the ETF.
"Just make sure you have a high risk tolerance and can stomach big moves, as large swings are bound to happen with this intriguing emerging market ETF," Zacks says.
Investors who want to take this kind of aggressive approach may benefit from risk management tools that allow them to stay on top of market developments as they happen.
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