Financial sanctions have had a direct impact on Russia — and Russian markets — but they’ve so far had a less direct impact on the vast majority of investors.
The average international equity fund — an investment portfolio that invests in international stocks — had about 99% of its holdings in places other than Russia, according to Daniel Culloton, editorial director of manager research at Morningstar.
Even a specialized fund that looks to focus on emerging markets, like the MSCI Emerging Markets Index, has about 97% of its assets with other parts of the world.There are always knock-on effects even if positions in Russia are 1%-3%, says Culloton. Emerging markets, including Russia, tend to trade together and when there is turmoil, investors pull back and flee to safer bets, which impact other parts of markets.The people in charge of picking the positions for these portfolios may not choose to act on what they see right now — or may not be able to.
They may not be able to find a market willing to trade Russian securities, for example, especially when the Moscow Stock Exchange is closed or the New York Stock Exchange and Nasdaq are prohibiting trades ofTake a look at your investment accounts and see what index funds you’re in or what your active managers have been doing, says Culloton.
“The most important thing to remember though, is that it's generally a bad idea to make rash decisions in the middle of an emotional crisis that's very fraught with cognitive dissonance.”
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