Emerging markets exchange traded funds (ETFs) allow an investor to spread their dollars across a number of countries and currencies while getting exposure to some of the fastest-growing economies in the world. They come in all levels of diversification, and a broad-based fund can be a good place to start. Zoe Van Schyndel for The Motley Fool delves into four ETFs from different providers, offering differently similar investment tools. Barclays Global Investors’ iShares MSCI Emerging Markets (EEM) and Vanguard’s Emerging Markets (VWO) are the heavyweights in this area, with more than $16 billion in assets each. The oldest fund is PowerShares’ BLDRs Emerging Markets 50 ADR (ADRE) and at 5 years old has $450 million in assets. State Street’s SPDR S&P Emerging Market (GMM) has reaped $19 million in assets in a few months.
All four funds have a lean towards Latin America and Asia, with Asia representing close to 50% in all four ETFs. Emerging markets are subject to wide swings, so a broad-based fund can help minimize the risk of country, industry, market and currency. More options is great, so it’s important to look under the hood and know what you are buying. Here is a brief summary to get you started:
- EEM: expense ratio 0.77%; 278 holdings, South Korea 15%; Brazil 12%; Hong Kong 15%.
- VWO: expense ratio 0.30%; 794 holdings, South Korea 15%; Taiwan 13%; Hong Kong 11%.
- ADRE: expense ratio 0.30%; Brazil, China, South Korea; 26%, 15%, 14% respectively.
- GMM: expense ratio 0.60%; 449 holdings; China, Brazil, South Africa; 16%, 14%, 11% respectively.
For full disclosure, some of Tom Lydon’s clients own ADRE.
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.