Emerging markets are countries transitioning from developing to developed economies, known for their rapid economic growth. These nations typically have lower per-capita incomes than developed countries but offer significant economic potential.
BRICS stands for Brazil, Russia, India, China, and South Africa, representing some of the top emerging market countries. Other nations like Mexico, Indonesia, South Korea, Turkey, and Taiwan also play a significant role in the emerging markets landscape.
Investors looking for higher returns often turn to emerging markets due to their rapid industrialization and expanding middle class. Exchange-traded funds (ETFs) are a popular way to access the potential of emerging markets.
Understanding Emerging Market ETFs
An emerging market ETF is an investment vehicle that tracks the performance of a basket of stocks from developing countries. Traded on stock exchanges like individual stocks, ETFs offer a diversified approach to investing.
Key benefits of investing in emerging market ETFs include diversification across a wide range of stocks and exposure to growth opportunities in rapidly expanding industries.
While emerging market countries experience rapid GDP growth, the stock gains may vary due to factors like political instability, economic fluctuations, and currency volatility.
Top Performing Emerging Market ETFs
If you’re considering investing in emerging markets through ETFs, here are some top-performing funds based on criteria like historical performance and expense ratio:
- iShares MSCI Emerging Markets Small-Cap ETF (EEMS)
- 2024 YTD performance: 11.4%
- Historical performance (annual over 5 years): 11.1%
- Expense ratio: 0.7%
- Freedom 100 Emerging Markets ETF (FRDM)
- 2024 YTD performance: 14.8%
- Historical performance (annual over 5 years): 10.2%
- Expense ratio: 0.49%
- Cambria Emerging Shareholder Yield ETF (EYLD)
- 2024 YTD performance: 16.2%
- Historical performance (annual over 5 years): 9.1%
- Expense ratio: 0.63%
Are Emerging Market ETFs Worth It?
Investing in emerging market ETFs provides a diversified way to tap into international growth potential. However, it comes with risks like political instability and economic challenges that can impact returns.
Before investing, research the specific holdings, country allocation, and expense ratio of each fund. Consider whether a fund is passively or actively managed, as this can affect performance and fees.
Final Thoughts
Emerging market ETFs offer an avenue to invest in growing economies, but diligent research is crucial. Past performance doesn’t guarantee future results, so make informed decisions based on thorough analysis.
Disclaimer: Conduct independent research before making investment decisions, as past performance is not indicative of future results.