Last August we reviewed the Latin American markets and said that their trend was looking strong for investors. Since then the iShares S&P Latin America 40 Index Fund has gained over 40% while during the same time period our own S&P500 has only gained about 5%.

We still like how these stocks look. The Latin America fund is made up of a diverse group of companies from all of the major sectors and from different areas of Central and South America. We believe that it is a good idea to keep some of your investment capital in emerging market investments because of their much higher potential for growth then companies here. The Latin America fund is a great way to do this. It is well diversified to guard against any problems and in many ways more advanced than other emerging markets such as China and India.

In the chart below you can see the large gains that this sector has had in the last couple years. It has more then doubled in price in the last two years and shows no signs of slowing down yet. The Stochastics indicator has been in the overbought level for some time now, but we believe that this is actually an indication of a strong trend. A correction is inevitable at some point, but we believe that this should go to 160 at least, in the next few months. However, if it happens to drop back down to 130, we will consider the gains to be over for a while.

If you want to invest in Latin American companies the easiest way is the fund that we mentioned above, its symbol is ILF. There is also a Brazil fund (EWZ) and a Mexico fund (EWW). You might also consider Latin America ADRs or companies that are starting to grow their business in Latin America.

Price Headley is the founder and chief analyst of BigTrends.com.