For many years, the term emerging markets has been bandied about with great enthusiasm by fund houses and financiers as the next up and coming thing and should sit alongside the BRIC (Brazil, Russia, India and China) funds that everyone should have a small part of their portfolio in.

Another term that is used is the frontier market. Guess what? Once again, these are no more than groupings of separate countries with a tenuous connection.

You can see the meeting in the marketing department of the bank being carried out by people with surnames as first names. “Hargreaves, Mayweather and Klein, we need people to buy into some stock that we hold and don’t want to anymore. If we can just take five percent of our customers’ portfolios, that should be enough”.

That could be one of the only explanations for the any Frontier Markets Index tracker fund. How else could you explain grouping together 29 countries from Argentina to Vietnam.

While the MSCI frontier index is just that, an index and you can’t invest directly into it, there are funds that use the MSCI research for the weighting of their own tracker or mirror funds there are a few reasons why you should only invest in these funds with a massive amount of caution.

As a collection, one way that so many different countries group together is the low levels of income per capita. These countries tend to have a perceived bias toward to a smaller, less balanced and more volatile stock market with lower levels of shareholder and corporate governance.

Secondly, the massive diversification across the board could lead to no real focus.  The states representing the Middle East are predominantly based around oil where Argentina is very heavily based around commodities.  Again on a macro front, would you take the political stability of either Lebanon or an EU member in Slovenia?

On the flip side, it is said that through the huge diversity inherent in these funds, it reduces the volatility if you invest across the sector and gives people a chance to invest in areas they but in all honesty, if you are not a specialist investor and your risk profile means that you should be investing in lower volatile areas, there are many ways to reduce your volatility and your risk at the same time.

These are Argentina, Bahrain, Bangladesh, Burkina Faso, Benin, Croatia, Estonia, Guinea-Bissau, Ivory Coast, Jordan, Kenya, Kuwait, Lebanon, Lithuania, Kazakhstan, Mauritius, Mali, Morocco, Niger, Nigeria, Oman, Romania, Serbia, Senegal, Slovenia, Sri Lanka, Togo, Tunisia and Vietnam.

What a mix of countries this is.  With no other collective grouping other than its individual peoples having a lower income. The only main selling point to me is that they give people a chance to invest in areas that they wouldn’t normally. Yes, so unless you are a specialist investor with a high risk threshold, just stay clear of these funds.

There is a reason why they are called frontier. Think Wild West, think some people will make money and the most will not. Think Hargreaves, Mayweather and Klein collecting their bonuses.