Indonesia Is a Volatile Investment

As expected, Indonesia reelected Susilo Bambang Yudhoyono, with an estimated 61% of the vote. The large victory should aid him in his push for infrastructure development, which has lagged due to decentralization and corruption. Unlike former dictator Suharto, the President can no longer push through infrastructure projects, while corruption creates high levels of uncertainty. Nonetheless, Indonesia is well positioned for growth if Yudhoyono can deliver on even a portion of his promises.

Investors can gain exposure to the country via the Market Vectors Indonesia ETF (IDX - commentary - Trade Now), but expect a lot of volatility. Bloomberg reported that Indonesia's currency, the rupiah, fell 40% and rallied 19% in the past year alone. Add on the changes in stock prices, and it's a recipe for wild swings. The current pullback may provide a good entry point, as the IDX is 16% off its high this year, but it is still more than 100% above its low in March.

For more on the IDX, please revisit this more detailed article that I wrote back in May.

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Know what you own: Other diversified emerging market ETFs include the Market Vectors Brazil Small-Cap ETF (BRF - commentary - Trade Now), Market Vectors Gulf States ETF (MES - commentary - Trade Now), Market Vectors Africa ETF (AFK - commentary - Trade Now), iShares MSCI BRIC Index (BKF - commentary - Trade Now), iShares MSCI South Africa Index (EZA - commentary - Trade Now) and iShares MSCI Emerging Markets Index (EEM - commentary - Trade Now).

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At the time of publication, Dion had no positions in the stocks mentioned.

Don Dion is the publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.

Dion is also president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.