Submerging Markets

After a blistering 36% surge last year, emerging market stocks are bleeding red ink. As of Sept. 5, the MSCI emerging markets index is down 30% since the start of the year. China and India - among the best-performing markets in 2007 - are now down 40% year-to-date.

As gut-wrenching as this volatility may be, it's important to keep the long-term perspective in mind when looking at emerging markets. Over the past 10 years, emerging markets have returned nearly 14% a year on an annualized basis, even after factoring in this year's steep plunge. By comparison, stocks in the U.S. and Europe have returned less than 3% annually over the same stretch. Emerging markets may be risky, but over the long haul they have rewarded patient investors.