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Fund Watch

Don't Be Scared of Emerging-Markets Bonds

Bob Frick

Fidelity New Markets Income fund offers high returns with low volatility and costs.

Have we got a deal for you! How about an investment that’s less volatile than the U.S. stock market, has returned an annualized 12% over the past ten years and is fairly cheap to own? Now, when you hear what it is, you may react viscerally and say, No way -- kind of like when you first tried stewed spinach, even though you knew it was good for you. So brace yourself.

The investment is one that owns debt of developing countries. That means government bonds from such places as Russia, Turkey, Indonesia and Mexico. As a class of investments, emerging-markets-debt funds have had a great run over the past dozen years, as many developing nations have improved their fiscal situations and instituted the rule of law in economic matters.

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