Emerging markets exchange traded funds(ETFs) have earned the respect of many investors, and providers are reacting to the positive response with specialized products.

Emerging market ETFs are gaining investors’ interest, even in these economic climes. Naturally, providers have responded to the demand with increasingly specialized funds. Where once we saw ETFs focused solely on regions or specific countries, now there are funds focused on emerging market sectors and asset classes. It’s a trend largely only seen in developed markets until now.

The growing appeal of ETFs by both retail and institutional investors can be thanked, in part, by the liquidity they provide. This liquidity is especially key in emerging markets, reports Joan R. Magee for The Wall Street Journal.

There are ways to tackle the increasing number of choices:

• Consider your risk tolerance. The more broad the fund, the more spread out your risk is going to be. Choosing an all-encompassing Asia ETF is different than selecting a Taiwan fund.
• Consider your current allocation. If you’re already heavy in oil, for example, do you really need both a Russia ETF and an emerging markets energy fund?
• Emerging markets can be volatile – protect yourself and mitigate the risk with a strategy.
• Whatever you do, consider the role of emerging markets in your portfolio. Experts now feel that international exposure is a key component of any portfolio.

• iShares MSCI Emerging Markets Index (EEM): up 34.1% year-to-date

• Vanguard Emerging Markets (VWO): up 39.1% year-to-date

• SPDR S&P Emerging Markets (GMM): up 35.2% year-to-date

For more stories about emerging markets, visit our emerging markets category.

Tags: EEM, Emerging Markets, Global ETFs, GMM, Trend Following, VWO