Some Like it Hot
While there's money to be made south of the border, it's best to invest in Latin American funds in small doses.
That said, how can you not love the returns from T. Rowe Price's Latin America fund (PRLAX)? As of December 23, 2005, its year-to-date total return was plus 60.69 percent. Look at its three-year history and, according to Morningstar, that average annual total return is 50.92 percent. Go back five years, and it's 24.2 percent. That's still a mighty return on an investment, but it's half that of the three-year average. And therein lies the truth of all Latin American fund investing: The region, like this fund, is hot-blooded.
"It's a volatile investment suitable for long-term investors," says Gonzalo Pangaro, portfolio manager of the T. Rowe Price Latin America fund.
The fund keeps between 40 and 45 stocks in the portfolio; at press time, most belonged to companies in Brazil, Chile and Mexico. Some of those companies include regional banks and financial services companies, Mexican cement company Cemex, and Brazilian cosmetic company Natura.
As with anything hot and spicy, a little goes a long way. The pros recommend keeping your allocation of Latin American funds in the 3 percent to 5 percent range.