4 Reasons Africa ETFs Look Appealing

September 11th at 2:00pm by Tom Lydon

ETF africaInvestors who are adding risk and seeking better potential returns are turning to emerging markets. One such market that many may glance over is Africa. But through the use of Africa’s related exchange traded funds (ETFs), an investor can capture the growth potential of the region in a simple and cost-effective way.

The reason Africa is becoming an interesting area for investment, writes Aaron Levitt for Investopedia, is because the continent has a medley of beneficial factors:

  • The region has experienced an average 6% growth since 2004
  • Africa contains almost 40% of the earth’s total gold reserves and 30% of mineral deposits are in the continent’s ground
  • African nations have favorable global trade pacts, which help fund African infrastructure and telecommunications
  • Most importantly, countries in the region are becoming more politically stable

An interested person may consider investing in the region through ETFs, but there is a caveat. Since Africa is an emerging market that’s still going through a big growth phase, volatility is a risk factor to keep in mind.

South Africa is the largest economy on the continent and it often has a higher weighting in regional ETFs as well as its own ETF:

  • iShares MSCI South Africa (NYSEArca: EZA): up 44.6% year-to-date

ETF EZA

  • WisdomTree Dreyfus South African Rand (NYSEArca: SZR): up 30.2% year-to-date

ETF SZR

  • SPDR S&P Emerging Middle East & Africa (NYSEArca: GAF): up 40% year-to-date

ETF GAF

  • Market Vectors Africa (NYSEArca: AFK): up 33.9% year-to-date

ETF AFK

For more information on Africa, visit our Africa category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.