If you had invested in mutual funds three years ago, during the post-dot-com gloom, which sector would have made you the most money? Real-estate funds? No. Natural...

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If you had invested in mutual funds three years ago, during the post-dot-com gloom, which sector would have made you the most money? Real-estate funds? No. Natural resources? Not quite.

The winning strategy was to pour your money into small and volatile developing economies.

But a more geographically diversified approach — using what are known as emerging-market funds — would have served well, too. In the three years ending in June, emerging markets posted whopping annualized gains of nearly 23 percent.

“If you don’t have a stake in emerging markets, you’ll miss out on many of the world’s fastest-growing economies,” says Patricia Higase, co-portfolio manager of the Matthews Asia Pacific Fund, one of the seven Asian funds Matthews offers. “China’s per capita income has quadrupled in the past 20 years.”

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Definitions of emerging markets vary, but the term typically applies to developing countries with a per capita gross national product of $10,000 or less.

Brazil, Australia and Mexico are benefiting from strength in oil and commodity prices. Southeast Asia boasts rapidly rising consumer incomes and a burgeoning middle class.

Political and economic instability often take emerging-market investors on a wild ride. That’s why many experts recommend that emerging-market funds represent only a small part of a diversified equity portfolio.