ETF Investing Guide: Summary: Emerging Markets & Closed-End Funds

• Despite their volatility, allocating a small portion of your portfolio to emerging markets stocks can increase your diversification and lower your geographic risk. It can also give you exposure to countries that are expected to grow faster than the USA and Europe and whose stocks may be cheaper using traditional valuation metrics (Why You May Want Exposure to Emerging Markets).
• Emerging market stocks are volatile and have under-performed the USA and Europe over the last decade - so be careful (Why You May Want Exposure to Emerging Markets).
• Active portfolio management makes more sense in relatively illiquid markets. Emerging markets are probably the most promising area for active managers (Why Use Closed-End Funds?).
• Closed-end mutual funds trading at discounts to net asset value can be a good way to get exposure to emerging markets. You are buying stocks at a discount, and emerging markets stocks are arguably well suited to the closed-end fund model (Why Use Closed-End Funds?).
• While there’s no guarantee the discounts will narrow, they often do (Why Use Closed-End Funds?).
• Buying funds at a discount means you are purchasing stocks at a more attractive valuation and in many cases with a higher dividend yield, than otherwise (Why Use Closed-End Funds?).
• Be careful when buying closed-end funds in practice. They are often illiquid, so large orders can move prices if you don't use limit orders (Buying Closed-End Funds in Practice).
• Some web sites rank closed-end funds by discount to net asset value. You can find those sites in The ETF Resource Page.
• Closed-end funds can be treated like ETFs for portfolio management. You can use the same techniques for tax loss selling (Turning Taxes to Your Advantage) and portfolio rebalancing (How to Make Money By Rebalancing). Since closed-end funds and ETFs both trade like stocks, you can manage them easily in a single account.

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