Emerging market exchange traded funds (ETFs) are one of the best ways to diversify, and investors have found that they have generated exciting returns in recent years.

If you can stomach the risk that often comes with these areas of the world, investors might be able to capture some of the potential that developing countries offer, Matt Krantz for USA Today reports.

Emerging markets are among the riskier asset classes, but that does not mean you should avoid them. It is crucial to understand this asset class and incorporate it into a portfolio in a way that the overall risk is tolerable. Among the issues you may find are political risk, immature capital markets and systems of accounting, and the risk that an emerging economy’s growth might hit a bump in the road.

Take a look at this year: shares of Chinese stocks have fallen around 30%, much steeper than the S&P 500’s 17% dip. Look at these emerging markets ETFs and decide how they fit into your overall portfolio and risk profile:

  • iShares FTSE/Xinhua China 25 Index (FXI), down 20.3% year-to-date
  • Vanguard Emerging Markets (VWO), down 12.8% year-to-date
  • iShares MSCI Emerging Markets Fund (EEM), down 11.8% year-to-date
  • PowerShares FTSE/RAFI Emerging Market Portfolio (PXH), down 11.5% year-to-date

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.