Your Money: Advice from a fan of the Baltics

Posted: October 16, 2013

Investors are witnessing our transformation from a functioning democracy to a dysfunctional political mud wrestle, thus making some emerging markets outside the United States look stable and inviting.

Emerging markets, however, experienced a panicky sell-off this year, a plunge that ended around May 1, so it's important to tread carefully.

We checked in with Peter Kohli, a portfolio manager who runs DMS Funds in Leesport, Berks County, "just at the end of the Reading airport runway," as he describes it. We wanted to find out why he likes emerging markets so much these days, in particular Central and Eastern Europe, and how investors can put money to work the way he does.

Kohli doesn't love all emerging markets. For instance, he avoids Africa right now, for reasons that include the strife within and among some nations there.

He does, however, like the Baltics (Latvia, Lithuania, and Estonia), which count as part of Central and Eastern Europe. He cited the Baltic countries' collective 5 percent growth in gross domestic product and their avoidance of bailout money during the financial crisis.

For clients, Kohli trades the following, which he says are low-cost and have a direct or indirect exposure to emerging markets: the ProFunds Basic Materials UltraSector fund (BMPIX), ProFunds Consumer Services fund (CYPIX), ProFunds Industrials (IDPIX), ProFunds Europe 30 (UEPIX), ProFunds NASDAQ 100 Index fund (OTPIX), Rydex Midcap 400 Pure Growth Index fund (RYBHX), Rydex SmallCap 600 Pure Growth Index fund (RYWAX) and Rydex SmallCap 600 Pure Value Index fund (RYAZX). Be aware that some of these funds use leverage, or borrowed money, so they can move up and down in price more severely than a typical index fund.

Kohli has also come up with his own proprietary index funds to invest in India, the Baltics, and Poland: the DMS Indian MidCap Index Fund (DIIMX), the DMS Indian Bank Index Fund (DIIBX), and DMS Baltic Index Fund (DBIAX), all of which track the performance of the Baltic benchmark index, and the DMS Poland Large Cap Index Fund (DIPLX).

We will be filing this week from the Wharton School on the University of Pennsylvania campus, where I'm attending the Wharton Seminars for Business Journalists.


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