The Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and iShares MSCI Emerging Markets ETF (NYSEArca: EEM), the two largest emerging market ETFs, have increased 18.0% and 16.6% year-to-date, respectively, compared to the 6.2% gain in the S&P 500.
Nevertheless, the emerging markets remain attractively priced, with VWO showing a 13.7 price-to-earnings ratio and a 1.5 price-to-book, and EEM trading at a 12.9 P/E and a 1.4 P/B. In contrast, the S&P 500 Index is showing a 19.1 P/E and a 2.7 P/B.
Income-oriented investors may also find much more attractive yield opportunities with emerging market debt. For instance, the broad VanEck Vectors Emerging Markets Aggregate Bond ETF (NYSEArca: EMAG), which includes a combination of U.S. dollar-, euro- and local currency-denominated bonds, comes with an attractive 4.00% 30-day SEC yield.
The VanEck Vectors J.P. Morgan EM Local Currency Bond ETF (NYSEArca: EMLC), which tracks emerging market bonds denominated in the local currencies or in the currency of the issuing country, has a 5.49% 30-day SEC yield.
Additionally, the VanEck Vectors Emerging Markets High Yield Bond ETF (NYSEArca: HYEM), which targets USD-denominated speculative-grade emerging-market bonds, has a 6.02% 30-day SEC yield.
Investors seeking to build a diversified investment portfolio should consider incorporating emerging market stocks and bonds, which may potentially enhance returns over the long haul and provide low correlation with other asset classes.