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Lesson Learned: Not respecting EM volatility after a good run
One of my biggest lessons in EM equities came from getting complacent after a strong six-month run in a particular LatAm market. I started sizing up without sufficiently widening stops, assuming the momentum would just continue. When a sudden geopolitical shock hit, I ended up taking a much larger loss than necessary because I hadn't factored in the tail risk that's inherent in some of these markets, even when things look good. It really drove home the point that risk management needs to be dynamic, especially in EM, and not just based on recent performance.
1 comments · 1 points
That's a classic trap, and an important reminder about the often-underestimated volatility in emerging markets. It's easy to get lulled into a false sense of security when things are going well, but the tail risks can unwind very quickly. Did you adjust your position sizing approach for EM specifically after that experience?