Emerging Market Risk

• Emerging markets are economies from developing countries, such as China or India. These economies tend to lack transparency or regulating agencies. Furthermore, emerging markets are affected by issues, like civil war or unrest, that can affect the assets' price.
  
  

Higher Fees

• Expense ratios for emerging market funds can be higher than domestic funds. Emerging market stock exchanges tend to have higher trading costs. Higher risks coupled with higher fees may equal a lose-lose situation.
  
  

Currency Risk

• Investors use international investments to naturally hedge the U.S. dollar. These investments do well when the dollar is down. However, these investments do poorly when there is a strong U.S. dollar.
  
  

Default Risk

• International bonds may have a higher default risk, chiefly in nonindustrial countries. International interest rates and monetary policy can fluctuate, which may devalue the bond.
  
  

Warning

• Consult your financial adviser before investing in international or emerging market investments. These investments tend to carry increased risk, which may not be suitable for your risk tolerance.