While I believe investors should remain invested in emerging markets, I’m not advocating a straight allocation to basic emerging market stock funds. Instead, I prefer three alternatives:
1.) Minimum volatility funds, which are designed to help smooth out volatility, such as the iShares MSCI Emerging Markets Minimum Volatility Index Fund (EEMV).
2.) Funds representing regions or countries (I still like China)
3.) Interpreting “emerging markets” to also include frontier markets. While a traditional emerging market benchmark is down year-to-date, frontier, or “pre-emerging” markets, have been performing well. Frontier markets are accessible through the iShares MSCI Frontier 100 ETF (FM).
Russ Koesterich, CFA, is the iShares Global Chief Investment Strategist.
The author is long both EEMV and FM.