Mutual Funds in Emerging Markets; Prospects for Personal Financial Planning

Abstract

Globalization has mammoth divergent opportunities that are distinct in promoting economic changes in emerging markets. These include but not limited to trade, foreign direct investments, short-term capital flows, knowledge and movements of labour. The prospects for financial sectors in emerging markets are great. The capital market opens up to new investments that tend to boost overall economic performances. The occurrence has been impelled by technical change, denationalization in emerging markets, the deregulation of the financial markets in industrial countries, increased in institutional investors in developed economies and macroeconomic and trade reforms have portrayed emerging markets more attractive. These amounted to various opportunities for the financial industry in emerging markets. With several natural resources such as oil and other mineral deposits, developing countries mostly within the African region emerge with positive fiscal projections for the capital market. Since some mutual funds invest in the capital and money markets, with proper personal financial planning, financial independence is eminent in the future for the lay investor. Mutual funds have the potential for higher yield with minimum risk as compared to some other risky investment schemes such as forex trading. Professional fund management and easy liquidity of assets are some advantages of investing in mutual funds. However, investment yields on mutual funds are not guaranteed as fund assets are invested in shares, bonds, and stocks which may have fluctuating market price movements. Randomly selected invested capitals were computed using simple expected future value formula. The result indicated higher returns potential on investments in mutual funds in the long run. It was therefore concluded that there is enormous opportunities for wealth creation in investing in mutual funds in emerging markets which is ideal for personal financial planning.