1. Diversify across several emerging market countries and increase your core exposure to large, mid and small cap stocks. Today, perhaps more than ever before, investors are drawn to the high degree of diversification available through ETFs, which can mitigate the risk and volatility of individual countries, sectors, and companies. One way to do this is through the iShares Core MSCI Emerging Markets ETF (IEMG).
2. Customize by country. If you are seeking exposure to individual regions with strong fundamentals, we have two suggestions:
a. China. We are currently overweight China. We believe Chinese equities are undervalued considering their growth and profitability potential and suggest the iShares MSCI China ETF (MCHI).
b. South Korea. We are currently overweight South Korea, recently upgrading it from neutral due to its stocks’ attractive valuations and exposure to global growth. We like the iShares MSCI South Korea Capped ETF (EWY).
3. Minimize volatility. In the current interest rate environment, short and mid-term volatility can be a major concern. Consider the iShares MSCI EM Minimum Volatility ETF (EEMV) for downside protection plus exposure to potential gains in the emerging market equities space.
Investors may also want to look at exposure to frontier markets, such as the iShares MSCI Frontier 100 ETF (FM). This segment of the market has seen meaningful gains – roughly 18% – in the past year.
Dodd Kittsley, CFA, is the Global Head of ETP Research for BlackRock and a regular contributor to the The Blog. You can find more of his posts here.