Faint-hearted investors, turn the page - quick.
This story is for the bungee jumpers and sky surfers of the investment world.
Thrill-seekers can find headlong, double-digit returns - or retreats - in funds that focus on lone emerging markets abroad.
Consider some eye-popping examples: Hungary last year, up 127 percent (Budapest SE index); Poland in 1993, up 1,095 percent (Warsaw General); China in 1992, up 147 percent (Shanghai Composite).
"There is a lot of value and earnings potential to be found outside the United States, particularly in emerging markets," says Douglas Johnson, senior international investment strategist at Merrill Lynch in New York.
An emerging market is a developing economy: growing rapidly but not yet ready for the industrialized ranks of the US, Japan, or Britain. Some examples: Hong Kong and Poland. They typically use cheap labor to attract foreign companies.
But the riches strike erratically. And the risks are large.
For instance, after its barn-burning return of '93, Poland's market plunged 39 percent in '94.
Indeed, single-country emerging market funds should claim no more than a small share of a typical investor's portfolio, say investment advisers.
Such markets are crudely regulated and often vulnerable to manipulation. And native currencies and politics can buck wildly.
Investment advisers offer the following tips:
* Invest for at least five years and in several markets.
* Focus on countries where stock prices are cheap in relation to underlying earnings.
* Balance your US investments with markets "unhooked" from trends on Wall Street.
Several markets meet these criteria, but three stand out: South Korea, Thailand, and Brazil.
Korea and Thailand "are among the most oversold markets in the world at a time when the potential for positive price movement is quite high," says Mr. Johnson at Merrill Lynch.
Investment advisers note several ways to tap such markets. They vary in complexity, risk, and ease of entry:
Mutual funds. Many fund families, both large and small, offer funds in emerging markets, either with a worldwide or regional focus. These generally offer the easiest and lowest-cost entry. But few focus on a single emerging economy.
Closed-end mutual funds. These are the most common way to profit from a lone emerging market. They are most often traded on the New York Stock Exchange, bought and sold through a stockbroker.
Unlike traditional, open-end mutual funds, which offer an unlimited number of shares, closed-end funds issue a fixed number of shares.
This means share price fluctuates not only with the value of underlying stocks owned by the fund, but also with investor demand.
Many closed-end funds trade at a discount to such assets.
But for fund managers, they are easier to manage: No sudden inflows of cash to invest. And if a market tumbles, they will not face the stampede of skittish shareholders that forces many open-end managers to sell stocks in order to redeem shares.
"The big advantage of closed-end funds is that the manager can take more risks because he is handling a pool of money that does not change," says Bill Rocco, an international analyst at Morningstar Inc. in Chicago.
Individual stocks. Diversify into at least five stocks originating in a foreign county but sold on a US stock exchange. Financial advisers say this course offers some stability. Such stocks are often high-quality, well-established companies with a solid record in earnings.
The gains might not equal securities bought in their own native markets, but the downdrafts may not be as hard, either.
"Country baskets." Like closed-end funds, they list on the New York Stock Exchange and are bought through a broker. But like index mutual funds, they keep expenses low by investing in the stocks of a foreign index.
Another variation on this theme are WEBS - world equity benchmark shares - which invest in the stocks of Morgan Stanley's single-country indexes.
This formulaic approach, although higher in stability, might underplay some of the most promising stocks.