Broad Emerging Market ETFs

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)

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)

Latin America Regional ETFs
iShares S&P Latin America 40 Index Fund (ILF)
SPDR S&P Emerging Latin America ETF (GML)

European Emerging Markets Regional ETFs
SPDR S&P Emerging Europe ETF (GUR)

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)

Frontier Markets
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.

Further Reading

• 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: 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.

Comments

[DavidJackson]

Quick question for ETF readers: One thing I wasn't clear enough on when I wrote this was: why use single country ETFs instead of a broad emerging market ETF? Is the only reason if you think that you can beat the broad index by picking a country? Or there's a benefit from rebalancing? What other reasons are there to avoid these ETFs in favor of single country ETFs? Thoughts appreciated!

[billb]

My opinion, it's no different than picking a single stock or small group of stocks over a broad based index. If I think Brazil is going to outperform other emerging markets, I buy Brazil, otherwise EEM. If I think Microsoft is going to outperform tech, I buy it, otherwise QQQQ.

Just my two cents ....

[Internet2k4]

EEM / VWO are reasonably spread among countries that have something going for them apart from energy / commodities, which you might own in other instruments. (I think the first thing to ask is "do I already own this story in some other way?) EEM / WVO are weak on the emerging Euro-zone Eastern Europe, which I play through EWO (Austria) but there is a new one (GUR) holding the countries themselves. I much prefer Canada to Latin America, South Africa, et al as an oil / metals country, which is even more fiscally more stable than the USA and has a strong banking sector, too.

[Ralph F]

On Emerging Europe, see also the ETFs and closed end funds here:
etf.seekingalpha.com/a...

[DavidJackson]

Update: We just added some new articles to the Further Reading section, specifically on the issue of which is the best broad emerging market ETF to choose for your portfolio.

[helsi]

Anyone have any info on stocks/etf's on Peru and/or Chile?