- Due to low liquidity, frontier markets are highly influenced by foreign capital inflows and outflows.
- Political risks, exposure to oil, and variegate PE ratios advise against investing in frontier market ETFs.
- However, there is one low risk high reward option.
A frontier market is a developing country not big enough to be considered an emerging market. The term describes smaller, less accessible, but still investable markets. Such investments are considered high risk because of high volatility and lack of information.
Small markets usually have low liquidity and are very sensitive to foreign fund flows. Capital inflows alongside positive sentiment quickly lead to a bubble. More →