(PUB) Investing 2016

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A notch higher in yield but lower in credit quality are Fidelity High Income SPHIX and T. Rowe Price High Yield PRHYX . Both are well-run funds with seasoned portfolio managers. At Fidelity High Income, Fred Hoff has built a strong record since 2000 that covers two major credit melt- downs. He had light exposure to automakers in 2007 and more recently has had limited energy exposure. He has occasionally built cash for defensive purposes, though it was only 3% at the end of October 2015 . Mark Vaselkiv has run T. Rowe Price High Yield since 1996 , and he’s done a fine job of diving into good value plays at the right time. For example, he added financials after the 2008 crisis. He has beaten peers and the benchmark over the trailing 10 years and since he took over in 1996 . Emerging Markets What’s wrong with emerging markets? The short answer is China. China’s growth slowed faster than most expected. That pulled the rug out from under commodity prices. That was bad news for China and many other emerging-markets commodities producers. But Brazil had its own turmoil beyond falling commodity prices, and quite a few emerging markets look fragile today. Emerging markets have been getting cheaper and cheaper, but now it takes a little nerve to get in because so many are under the gun. But it might be worth it. GMO ’s current seven-year forecast is for negative returns in stocks and bonds across the globe except for emerging-markets stocks and bonds, which are forecast to have returns of 4 . 1% and 2 . 2% annualized, respectively. If it is right, then there will also be a big cost to being out of emerging markets. Harding Loevner Emerging Markets HLEMX This fund is a nice steady performer. It has outper- formed in six of the past seven years. Management’s emphasis on high-quality companies with strong margins gives it some defensive characteristics. Comanager Rusty Johnson has been at the helm since the fund was launched in 1998 , and comanager Craig Shaw has been on board for five years.

American Funds New World NEWFX This is a great option for those who want to invest conservatively. American mixes emerging-markets companies with developed-markets companies that derive a big chunk of their business from emerging markets. It makes the fund tamer than its peers, and that’s not a bad thing given how volatile emerging markets are. I also like the skill and depth of the team and the low costs here. Matthews Asia Dividend MAPIX You don’t get all of emerging markets covered here, but Matthews’ expertise in Asia makes it worthwhile. The fund’s dividend focus serves as a nice reality check in an area that sometimes can have more hype than substance. Managers Yu Zhang and Robert Horrocks have solid records here and at other Matthews funds. More Ideas Morningstar senior analyst Laura Lallos shares some great ideas for small-cap funds in Research on Page 8 . In the Contrarian on Page 10 , I have our annual Buy the Unloved ideas for you. We are facing another tricky market environment that seems to offer equal parts peril and opportunity. I hope some of these ideas can help you adjust your portfolio so that you are well-positioned for the coming years. K