Emerging Investment Opportunities in International Markets

Quantitative Easing in Europe and in Japan has started to make a positive impact on equity prices in developing markets. In our view, one of the best ways to participate in this long-term trend is by investing in the Fidelity Diversified International Fund (FDIVX). FidelitySignal issued a BUY signal for the fund on February 8 and the fund was included in our Diversified Model Portfolio, as of that date.

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The potentially stabilizing U.S. dollar and commodity prices, and the prospect of world-wide economic recovery in 2016 are making emerging market investments attractive again to investors seeking growth.

The Fidelity Southeast Asia Fund (FSEAX) provides a solid way to participate in the Chinese and other Southeast Asian markets. FidelitySignal issued a BUY signal for the fund on January 23 and the fund was included in our Aggressive Growth Model Portfolio, as of that date.

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For investors seeking broad diversification across emerging markets including Southeast Asia, Eastern Europe and Latin America, the Fidelity Emerging Markets Fund (FEMKX) is our top rated choice. FidelitySignal issued a BUY signal for the fund on April 7 and the fund was included in our Megatrends Model Portfolio, as of that date.

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Visit FidelitySignal.com for additional investment strategies.

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Why Diversify into International Markets

The prospect of worldwide economic recovery in 2015 is already making investors rethink their diversification strategy. Equity markets often anticipate economic changes 6 to 12 month into the future, as market participants are taking positions ahead of time.

One of the best ways for conservative investors to participate in the renewed interest in international markets is via the Fidelity Diversified International Fund (FDIVX).  FDIVX invests 58% of its assets in Europe, but Japan and Emerging Markets carry large weightings, as well. FDIVX also invests 12% of its assets in the United States.

From the technical analysis perspective, the two-year chart of FDIVX shows a strong bullish trend that was interrupted by a correction only last June. For most of 2014 the fund moved sideways until the recent breakout to a new high:

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Buy and sell signals for Fidelity funds are available at FidelitySignal.com

 

Best Fidelity Funds for 2014 – Part 5: International Diversification (final part)

In the previous parts of the series we highlighted a handful of excellent Fidelity mutual funds that allow investors to build up core positions representing small cap stocks (see article), value investments (see article) and corporate bonds (see article), assuming that the current economic and market trends continue in 2014.

We also highlighted gold, as a potential contrarian investment (see article). While gold did not hold its recent support level and continues its downtrend, we expect that the gold mining sector will bottom in the first half of 2014 and may become an attractive investment again.

Today, let’s take a look at international investments, which can be used to diversify U.S. equity holdings in your portfolio. International equity markets have underperformed U.S. equities in 2013, but this may change in 2014. Currently Europe is the strongest with Nordic economies leading the way, but even a the weaker economies, such as Spain, Italy, Greece and Poland are expected to do well next year.

The weakest international investments in 2013 have been mutual funds investing in Latin America. The boom-bust market cycles are not unusual in that part of the world going back to the 1980, when these markets first became accessible to foreign investors. We regard funds focusing on Latin America as contrarian investment opportunities for 2014 with great potential to produce gains once the world economy starts growing again.

Thirdly, Asian investments have produced mixed results in 2014. Japanese equities were very strong in the first part of the year due to their weak yen policy, but rolled over and now in a broad trading range. Many investors and commentators cheered the recently introduced economic reforms in China. We are keeping a close eye on investing opportunities not only in China, but also in India and fast growing South Korea. Unique opportunities may also present themselves in the so-called “frontier” markets, such as Vietnam.

Fidelity has many excellent international mutual funds, but the one that stands out, as a great tool to diversify core holdings is the Fidelity Diversified International Fund (FDIVX). The chart below shows that its management team has been highly successful in identifying the right investments and generate an outstanding 22% return for shareholders so far in 2013.

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We all hope that 2014 will be as strong, as 2013 has been. In reality, financial markets seldom advance without any interruption.  Our previous study showed that U.S. equities are overbought by historic standards and now ripe for a correction (see article). That is why we suggest our readers to review the model portfolios at FidelitySignal.com, which provide buy and sell signals, and E-mail alerts for specific Fidelity mutual funds.

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