3 Emerging Market ETFs To Start A Portfolio
Since the first emerging market ETF, iShares MSCI Emerging Markets ETF (NYSE: EEM), launched in April of 2003, the asset class has exploded. Today, average retail investors can capitalize on the different growth opportunities around the world though a plethora of ETF options.
With the global economy more interconnected than ever before, cashing in on the success of a fast-growing emerging market is more complicated than in prior years. There is a large number of emerging market ETFs from which to choose, and choosing the best option can be complicated.
Given the current geopolitical condition, many emerging market ETF’s that have traditionally been viewed as bellwethers are fairly volatile as of late. The big four emerging markets, also know as the BRIC countries, have all had their fair share of market moving news.
- Brazil recently held the World Cup and has the Olympics coming in two years, as the economy struggles to regain its old growth numbers.
- Russia is dealing with economic sanctions because of the situation in Ukrain.
- India has had a great year after electing a new prime minister, who is viewed as an economic savior.
- China has its doubters around the globe, even though they continue to be one of the fastest-growing economies in the world.
Three ETF ideas that offer investors a range of investment opportunities as well as falling into various risk levels are highlighted below.
iShares MSCI Emerging Markets Minimum Volatility ETS (NYSE: EEMV)
EEMV offers stocks that characteristically have the lowest volatility in emerging markets. The countries with the largest exposure are China (19 percent), Taiwan (16 percent) and South Korea (12 percent).
EEMV has a similar composition to its big brother, iShares MSCI Emerging Markets Index (NYSE: EEM), however, it has outperformed its peers since the start of 2013 by 270 basis points. Year to date, the two ETFs have similar gains in the 7 percent range. Considering EEMV is designed to offer investors fewer sleepless nights and has been able to keep up with the gains of EEM, the former appears to be a better option.
Deutsche X-tracker Harvest CSI 300 China A-Shares ETF (NYSE: ASHR)
ASHER is one of only a few ETFs in the U.S. that provides an investor exposure to A-share Chinese stocks. China’s A-shares are stocks that trade on the Shanghai and Shenzen exchanges, a market historically only available to citizens of Mainland China or QFIIs (qualified foreign institutional investors). ASHR has a solid outlook, as China’s A-shares become more available to foreign investors, and the potential for more money flowing into China increases.
iShares MSCI Frontier 100 ETF (NYSE: FM)
FM is comprised of 100 of the largest securities in selected frontier markets. The regions with the highest exposure include the Middle East (55 percent) and Africa (22 percent), with zero exposure to Asia. This ETF is attractive to the investor that does not want to gain exposure to Asia or is looking to diversify into other regions of the world. Frontier stocks typically come from regions of the world that offer high-growth potential but are not yet stable enough to be considered emerging markets. This year, the ETF has been able to outperform both the emerging market indices, as well as the U.S., with a gain of 14 percent.
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