Another alternative is a dividend weighted emerging market index. The WisdomTree Emerging Markets Equity Income ETF (NYSEArca: DEM) and the iShares Emerging Markets Dividend ETF (NYSEArca: DVYE) are two choices. DVYE has outperformed the MSCI Emerging Markets Index with better risk-adjusted returns as well. [Dividend ETF Targets Emerging Markets]
And for those investors who like to stick with a broad-based, large-cap strategy, there are more affordable alternatives to EEM. The Vanguard Emerging Markets ETF (NYSEArca: VWO) and the iShares Core MSCI Emerging Markets Index ETF (NYSEArca: IEMG) are less expensive than EEM and provide exposure to the major BRIC countries minus India. VWO costs 0.18%, IEMG costs 0.23%, compared to EEM at 0.67%. [Dividend Stocks and ETFs: Is Bigger Better?]
“I’d argue that if you’re a buy and hold investor with a long time horizon, you’d be willing to handle the extra volatility in exchange for an expense ratio that’s less than half the cost of DVYE & friends,” Brendan Conway of Barron’s said.
iShares MSCI Emerging Markets Index
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own DEM, EEM and VWO.