Broad Emerging Market ETFs List
(click on symbol for data and articles)
"Total" Emerging Markets ETFs
iShares MSCI Emerging Markets Index Fund (EEM)
PowerShares FTSE RAFI Emerging Markets Portfolio (PXH)
SPDR S&P Emerging Markets ETF (GMM)
Vanguard Emerging Markets ETF (VWO)
GlobalShares FTSE Emerging Markets Index Fund (GSR)
Schwab Emerging Markets Equity ETF (SCHE)
Dividend Emerging Markets ETFs
WisdomTree Emerging Markets High-Yielding Fund (DEM)
Multi-Region (but not Total) Emerging Markets ETFs
BLDRS Emerging MKTS 50 ADR Index Fund (ADRE)
Claymore/BNY BRIC (Brazil, Russia, India, China) ETF (EEB)
streetTRACKS SPDR S&P BRIC (Brazil, Russia, India, China) 40 ETF (BIK)
iShares MSCI BRIC Index Fund (BKF)
Middle East and Africa Regional ETFs
SPDR S&P Emerging Middle East & Africa ETF (GAF)
Market VectorsGulf States Index ETF (MES)
Invesco PowerShares MENA Frontier Countries Portfolio (PMNA)
WisdomTree Middle East Dividend Fund (GULF)
Claymore/BNY Mellon Frontier Markets ETF (FRN)
What Are They?
- Broad and Regional Emerging Market ETFs cover multiple emerging countries' stocks in a single ETF. Those markets include countries in Eastern Europe and South America, as well as developing countries in Asia such as China and India.
- These ETFs are typically based on market-cap weighted indexes, and are therefore dominated by large cap stocks.
Why & How To Use Them
- Emerging market stocks are a distinct asset class, and are an important part of any diversified portfolio. What we've called "Total" Emerging Markets ETFs allow you to include a wide selection of emerging market stocks with a single ETF, making it easy to build and maintain a diversified portfolio.
- Emerging markets have outperformed developed markets in recent years, and many investors think they will continue to do so due to the rapid economic growth of countries like India and China and the current account surpluses many emerging market countries are now running versus the USA.
- Emerging market stocks tend to be more volatile and risky than US or European stocks. That means that investors need to use these ETFs carefully; but the volatility also provides an opportunity for short-term traders.
- Due to their breadth and liquidity, these ETFs tend to be cheaper than single country ETFs, with lower expense ratios and fairly narrow bid-ask spreads. In most cases, their costs are significantly lower than those of emerging markets mutual funds.
What to Look Out For
- There are significant composition differences between even the "Total" Emerging Markets ETFs. For example, some cover Russia while others don't. These differences in composition can lead to significant differences in performance.
- There can be wide differences in expense ratios between emerging market ETFs. Research them carefully.
- Vanguard ETFs tend to have extremely low expense ratios and low tracking error (divergence from their benchmarket indexes). But they also have a different structure (see Further Reading below) that might lead to lower tax efficiency for long-term investors.
- The case for emerging market stocks is discussed in Seeking Alpha's ETF Investment Guide, in the chapter Why You May Want Exposure to Emerging Markets.
- Helpful articles in choosing a Total Emerging Market ETF include: Emerging Market ETFs: Is There a 'Best' Choice? (Jay Walker), Why VWO Is the Better Emerging Market ETF (Gary Gordon), State Street Global Launches Its First Emerging Market ETFs (Matt Hougan), Vanguard ETFs: VWO versus EEM (Roger Nusbaum), Will International Vanguard VIPERs displace popular EEM and EFA? (David Fry), WisdomTree's Emerging Markets ETF Stacks Up Nicely Against iShares' Equivalent (Matt Hougan).
- Helpful articles in choosing from the other ETFs in this list include: BRIC ETFs: Solid Enough for Your Portfolio? (Pierre Daillie), SSgA's New BRIC ETF Offers Very Different Exposure Than the Competition (Matt Hougan), and SPDR Emerging Middle East & Africa Fund: Limited Geographical Diversity (Gary Gordon).
- Alternatives to buying two broad ETFs that cover emerging and developed stock markets: (a) choose from the Broad and Regional International ETFs that cover both or (b) assemble a more granular portfolio of Single Country Emerging Markets ETFs and Closed-End Funds, Single Country Asia ETFs, ETNs and Closed-End Funds and Single Country Europe ETFs and Closed-End Funds.
- Vanguard ETFs are cheap and well managed, but have a different structure from those of other providers. For more discussion of this, see J.D. Steinhilber's VIPERs Provide Lowest-Cost International ETF Alternative and Herb Morgan's The Problem With Vanguard VIPERs ETFs.
This page is part of The Seeking Alpha ETF Selector which sorts ETFs by type, highlights how to use them and what to look out for, and provides links to articles that discuss key issues for investors.