EMERGING market funds are classified as higher risk investments because they are more prone to political instability than funds that invest in developed markets.
The stock markets that emerging market funds invest in also have high volatility ratings so there is a greater chance share prices will be low when you want to sell.
Currency fluctuations are another hazard as emerging markets are subject to wider swings than developed markets.
Whether the potential rewards of emerging markets are worth the risk is a personal decision but a list of precautions for small investors issued by the Association of Unit Trusts in Britain is a useful guide.
Build up an established investment portfolio in developed markets before investing in emerging markets.
Limit your exposure to emerging markets to five or 10 per cent of your portfolio.
