Why Investors Should Consider Emerging Market ETFs | ETF Trends

As investors take a hard look at their portfolios, people should consider incorporating emerging market and related exchange traded fund exposure for more diversified investment exposure.

“That’s where the growth in the world economy is going to be. You know that emerging markets from practically nothing, now has half or more of the world’s GDP. Emerging markets are growing much faster than developed markets. The IMF believes that emerging markets will continue to grow faster,” Dr. Burton Malkiel, Princeton Economist, said, referring to – IMF’s World Economic Outlook Reports, World Economic Outlook, July 2019.

Dr. Malkiel attributed the ongoing growth potential of the developing economies to their large and favorable young population. In contrast, developed economies are seeing an aging demographic and a higher ratio of retired workers to young workers.

Emerging markets is “where you’re going to get the greatest growth in the world,” Dr. Malkiel emphasized.

Additionally, Dr. Malkiel argued that emerging markets look cheap, especially when compared to the high-flying performances in the U.S. markets where valuations look relatively pricey.

“The valuations today are extraordinarily attractive,” Dr. Malkiel added.

Investors can look to a fund like the Emerging Markets Internet & Ecommerce ETF (NYSEArca: EMQQ) to gain exposure to the consumer spending potential of the rising middle class in the growing emerging markets. EMQQ provides exposure to the growing emerging market consumer sector, notably those related to online retailers or the quickly expanding e-commerce industry.

To be included within the ETF’s underlying index, companies must derive the majority of their profits from E-commerce or Internet activities and further includes search engines, online retail, social networking, online video, e-payments, online gaming and online travel.

EMQQ primarily focuses on the internet and e-commerce sectors of the developing world, helping investors capitalize on the growth of consumption in emerging markets, which represents a significant growth opportunity as more than a billion people are expected to enter the consumer class in the coming decades.

For more information on global markets, visit our global ETFs category.

Disclosure Information

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results.

This information should not be relied upon by the reader as research or investment advice regarding the fund or any stock in particular. The opinions expressed may not be representative of experiences of other investors.

Investing involves risk, including the possible loss of principal. Investments in smaller and mid-sized companies typically exhibit higher volatility. The fund is non-diversified. International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Frontier markets generally have less developed capital markets than traditional emerging market countries, and, consequently, the risks of investing in foreign securities are magnified in such countries. These countries are subject to potentially significant political, social and economic instability, which could materially and adversely affect the companies in which the Fund may invest. The Fund invests in the securities of Internet Companies, including internet services companies and internet retailers, and is subject to risk that market or economic factors impacting technology companies and companies that rely heavily on technology advances could have a major effect on the value of the Fund’s investments.

There is no guarantee that the Fund or the index will achieve its investment objective.

As of 08/22/19, EMQQ did not have any holding of Cisco.