5 Popular Emerging Markets ETF (December 2023)
Investing in emerging markets (EM) can offer unique opportunities for growth and diversification in a well-balanced portfolio. In this article, we will look at five popular emerging markets ETFs, each offering a distinct approach to capturing the potential of emerging market economies.
Why Invest in Emerging Markets?
The number of emerging and developing economies vastly outnumbered that of developed economies. As such, the potential opportunities in the emerging markets sector should, at the very least, be given serious consideration by investors.
As explained by Yury Zusman, an investment strategist and author of the research series EM Dynamics, “The EM opportunity set is vastly bigger than developed markets when it comes to macro, and it plays a critical role in a diversified macro portfolio. Of course, far from all EM countries have liquid financial markets that international investors can access, but every year EM countries are developing their financial infrastructure and getting plugged into the global financial system. This trend will continue and the investable EM universe will expand, offering greater opportunities for diversification.”
For investors looking to add emerging markets equities to their portfolio, below is a list of 5 popular emerging markets ETFs.
Vanguard FTSE Emerging Markets ETF (VWO)
With more than $72 billion assets under management, VWO is one of the largest and most widely recognized ETFs in the emerging markets space. Managed by Vanguard, this ETF tracks the FTSE Emerging Markets All Cap China A Inclusion Index. With holdings spanning across various sectors and regions, VWO provides a broad representation of emerging market equities. Investors benefit from low expenses (0.08%) and comprehensive coverage, making it an attractive choice for those seeking emerging markets exposure in their portfolio.
iShares Core MSCI Emerging Markets ETF (IEMG)
Another popular emerging markets ETF is IEMG, which has over $70 billion assets under management. Managed by iShares, this ETF is designed to track the MSCI Emerging Markets Investable Market Index, which is composed of large-, mid- and small-capitalization emerging market equities. IEMG offers a more comprehensive representation of the market compared to some competitors. It also has a low expense ratio (0.09%) and appeals to investors looking for a diversified and affordable entry point into emerging markets.
iShares MSCI Emerging Markets ETF (EEM)
EEM is another notable offering from iShares, tracking the MSCI Emerging Markets Index. As one of the earliest ETFs in this space, EEM has gained popularity for its liquidity and long track record. Investors value its straightforward approach to capturing the performance of large-cap and mid-cap companies in emerging markets. EEM's established presence and ample trading volume make it a popular option for both investors seeking exposure to key EM economies. Note that, however, EEM has a relatively higher expense ratio (0.69%) compared to other emerging markets ETFs.
Schwab Emerging Markets Equity ETF (SCHE)
Schwab's SCHE stands out for its investor-friendly approach, offering exposure to emerging markets at a low cost. This ETF tracks the FTSE Emerging Index, encompassing a diverse range of stocks across various sectors in over 20 emerging market countries. SCHE's focus on cost efficiency appeals to investors who prioritize minimizing expenses while gaining exposure to the growth potential of emerging markets. It's a suitable option for those seeking a balance between affordability and comprehensive market coverage. It also has an expense ratio (0.11%) at a comparable level to other low cost emerging markets ETF on this list.
iShares MSCI Emerging Markets ex China ETF (EMXC)
EMXC takes a distinctive approach by tracking the MSCI Emerging Markets ex China Index, which includes emerging markets outside China, by far the largest emerging economy. 2. Seek long-term growth and international diversification. Such an approach allows investors access emerging markets while maintaining flexibility for a tailored approach to investing in China. Note that this ETF has a relatively higher expense ratio (0.25%) than most other ETFs on this list.
In conclusion, these five emerging markets ETFs offer investors diverse options to align with their investment goals, risk tolerance, and preferences. Whether seeking broad market exposure or a specific investment strategy, these ETFs provide efficient ways to tap into the growth potential of emerging markets while managing risk in a well-rounded investment portfolio. As with any investment, thorough research and consideration of individual financial goals are essential before making decisions.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.