Recently I had a look through a number of funds that offered investment options to various geographic areas of the world.

One such sector I had never heard of before: frontier markets. I know many investors feel emerging markets are a good option to keep in a diversified portfolio, but what are these frontier markets, and are they a good option as well?


From Wikipedia

A frontier market is a type of developing country which is more developed than the least developing countries, but too small to be generally considered an emerging market. The term is an economic term which was coined by International Finance Corporation’s Farida Khambata in 1992. The term is commonly used to describe the equity markets of the smaller and less accessible, but still "investable", countries of the developing world. The frontier, or pre-emerging equity markets are typically pursued by investors seeking high, long-run return potential as well as low correlations with other markets. Some frontier market countries were emerging markets in the past, but have regressed to frontier status.

Investopedia has a good comparison on Emerging Vs Frontier

While frontier market investments certainly come with some substantial risks, they also may post the kind of returns that emerging markets did during the 1990s and early 2000s. The frontier market contains anywhere from one-fifth to one-third of the world’s population and includes several exponentially growing economies.

The other Question

and are they a good option as well?

This depends on risk appetite and your current investment profile. If you have already invested in domestic markets with a well diversified portfolio and have also invested in emerging markets, you can then think of expanding your portfolio into these.

  • Pet peeve: Wikipedia is merely one of many wikis (Stack Exchange is another, of a sort!). But I can't suggest an edit because it's too few characters. Sep 22 '16 at 5:56
  • @XiongChiamiov Edited just for you :)
    – Dheer
    Sep 22 '16 at 11:39

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