Emerging Concern on Overseas Investments

Millions of dollars are making their way to mutual funds and exchange-traded funds focused on the developing world's new powerhouses -- China, India and Brazil. The returns have been awesome, until very recently. Now they are plummeting. Should you hold these kinds of investments now?

First, it's important to understand that formidable political, economic and demographic factors are contributing to the strength and investment attractiveness of these countries.

Brazil, a country with 186 million people, has a relatively young population. Twenty-six percent of its nationals are under the age of 14. It also boasts a diverse and robust economy. There will be an estimated 260 million Brazilians by the year 2050. Demographically, then, more and more Brazilians will continue to move into peak investing years, turbocharging consumer spending and boosting the demand for local equities. It's a good place to invest.

The annualized return of Brazil's Bovespa stock index was 19.5% on average each year over the last five years. And the Brazilian stock market is trading with a P/E ratio of only 11.8 -- better than the S&P 500's P/E ratio at the close of 2005. ...