Vanguard’s emerging markets exchange traded fund is far and away the best-selling ETF in 2012, raking in $9 billion through the end of July.

Vanguard MSCI Emerging Markets (NYSEArca: VWO) is also the top-selling ETF the past month with $1.2 billion of inflows, according to

A competing ETF that tracks the same index, iShares MSCI Emerging Markets (NYSEArca: EEM), has inflows of $782 million year to date, according to ETF Industry Association data through July 31.

There are signs of migration from EEM to VWO. The Vanguard fund is cheaper with an expense ratio of 0.2% compared with 0.67% for the iShares ETF. [Will BlackRock Cut iShares ETF Fees?]

In 2011, VWO saw inflows of $5.6 billion, while EEM bled $8.3 billion of outflows, according to the ETF Industry Association.

Emerging market ETFs let investors buy a basket of developing countries with one trade and low fees. Some investors and financial advisors use emerging market ETFs to diversify their equity and currency exposure.

Although emerging markets are known for their volatility, some investors like the lower sovereign debt levels combined with better growth rates and demographics [Tom Lydon, Chuck Jaffe Talk ETF of the Week: Emerging Markets]

Vanguard MSCI Emerging Markets

Full disclosure: Tom Lydon’s clients own EEM.

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