With much of the developed world still eking out paltry growth rates, developing economies look like attractive investment opportunities. While there are those that may be turned away by the riskier nature of the emerging markets, investors can consider low-volatility exchange traded fund options to gain exposure instead.
The emerging market story is an appealing investment idea. Developing market growth is set to outpace the developed world, and emerging markets are currently trading at about 20% discount to developed markets, writes Russ Koesterich, Global Chief Investment Strategist for iShares. The U.S. is also facing a fiscal cliff. [Consider Emerging Market ETFs as Global Growth Falters]
“With inflation stable and growth set to accelerate, we think the relative difference in value offers a good opportunity for investors looking to gain access to growth in a slow growth environment,” Koesterich said. “As such, we would advocate that investors overweight emerging market equities heading into the new year.”
Still, for those who do not want to stomach the potential swings in emerging market equities, investors can look for low-volatility emerging market ETFs. [Emerging Market ETFs]
For instance, the iShares MSCI Emerging Markets Minimum Volatility Index Fund (NYSEArca: EEMV) tries to reflect the performance of the MSCI Emerging Markets Minimum Volatility Index, which tracks emerging market stocks that exhibit lower absolute volatility. EEMV has a 0.25% expense ratio and comes with a 3.07% 30-day SEC yield.
Country allocations include Taiwan 15.3%, China 13.0%, South Korea 10.5%, Malaysia 9.2%, South Africa 8.2%, Thailand 6.9%, Brazil 6.8%, Chile 6.0%, Indonesia 5.3% and Colombia 4.0%.
Sector allocations include financials 25.6%, telecom services 13.6%, consumer staples 13.6%, information technology 8.3%, energy 8.2%, utilities 7.4%, materials 7.2%, health care 5.7%, industrials 5.5%, and consumer discretionary 4.8%.