I have been interested in and invested in Vietnam since the fall of 2006. I bought the Vietnam Opportunity Fund (VOF.L) at $2.48, sold half of it at $4.73 a few months later and still have some shares now trading at $1.99.

The fund hovered along at down a little for the year before starting to swoon about a month ago, consistent with the VN Index which is down 59% YTD.

The GDP has been en fuego, but less than in China, which has proven too hot to handle as now inflation appears to be running at 25-30%.

As I wrote several times along the way about Vietnam, a destination like this is going to have huge booms and huge busts along the way.

The story on the ground, which of course includes the inflation right here right now, is still the same. An average age in the early 20’s and a 70 million population in a country that will modernize and become more economically relevant.

I don’t discount the luck factor in leaving me with just having the house’s money left in the position.

There will soon be frontier market ETFs coming. It can be easy to forget but these things are not one-way trades. When the downturns come they are big and can last for a while.

None this means the asset class lacks viability but it hopefully makes the point for why I favor moderation in this sorts of themes. After selling down the position I was left with about a 1% portfolio weighting. If the fund had doubled again over the rest of 2007 it would have added 100 basis points to the overall portfolio which becomes a meaningful number when your benchmark is up mid single digits.

Obviously the fund did not double again. In dropping by 60% since that sale it has created a very small drag on the portfolio for the literal handful of clients that own it (I own it personally as well).

Vietnam going up a lot did not make the thesis right. Now that it is down a lot the thesis is not wrong. Committing to a frontier destination should be thought of as a very long term proposition that will not be right for everyone.

When the ETFs come out you need to really look in the mirror and know what you can withstand before buying one of them.

Last 5 posts by Roger Nusbaum

• The Big Picture for the Week of November 15, 2009 - November 14th, 2009
• Process Drilldown - October 23rd, 2009
• Sunday Morning Coffee 10-18-09 - October 18th, 2009
• A Little Followup From This Morning - October 8th, 2009
• Wednesday Roundup - October 7th, 2009