These are easy ways to invest internationally.
There’s a lot of talk about how America’s stock market rally is getting a bit long in the tooth. After all, we are in the midst of a bull market that ranks the second-longest in history; this 102-month rally is almost twice as long as the typical bull market length of just 54 months. As a result, some traders are looking overseas as an alternative. And why not, when some foreign stock markets are booming. There are a host of good emerging market ETFs that allow the typical American investors to access emerging markets without a lot of risk or knowledge required. Here are seven such funds to consider.
Vanguard FTSE Emerging Markets ETF (ticker: VWO)
The VWO is the largest emerging market fund by assets, with more than $85 billion under management. And as is typical of all Vanguard ETFs, it offers investors a way to deploy a focused strategy at a low cost; VWO charges investors 0.32 percent in fees, or $32 for every $10,000 you invest. The fund is admittedly a bit top-heavy, however. It’s biased toward the biggest emerging markets, with about 45 percent of the portfolio in China and nearby Taiwan alone. And its top 10 positions, including high-flying Chinese internet stock Tencent Holdings, represent about 20 percent of total assets.
iShares’ MSCI Emerging Markets ETF (EEM)
A similar fund worth a look is the EEM. It’s huge, with more than $36 billion under management, and it’s largely invested in the biggest emerging markets out there, with China at the top of its list. But practically, the fund is very different in that it is formulated to track an MSCI emerging market index instead of the FTSE one. And that means a few notable differences in holdings — the largest being that South Korea is 15 percent of the portfolio, second only to China’s 30 percent weight.
Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM)
If you’d prefer not to simply buy an index fund with a fixed list of emerging market names, the GEM is a more active ETF that hand-picks its components based on the investment bank’s assessment of a stock’s “good value, strong momentum, high quality and low volatility.” That manifests itself in a very different makeup than other ETFs; right now, Alibaba Group Holdings (BABA) and Samsung are top holdings that both the VWO and EEM funds haven’t prioritized. Tactical allocations like this theoretically fuel outperformance — so long as the managers at Goldman are making wise picks, of course.
Guggenheim MSCI Emerging Markets Equal Country Weight ETF (EWEM)
What if you want to play emerging markets, but aren’t sure which countries you should be biased toward and which ones you should try to avoid? Then let the EWEM take the guesswork out of the equation. A twist on the previously mentioned iShares EEM fund, this ETF uses the same index but requires all countries to be equally represented in the portfolio. The approach helps smooth out volatility if one region has a bad run. But the drawback is that if one country is hot, the fund cannot put more money into that opportunity.
iShares MSCI Minimum Volatility Emerging Markets ETF (EEMV)
Another approach to emerging markets that could smooth out the bumps along the road is the EEMV. As the name implies, the strategy of this fund involves investments in faster-growing nations but with an eye toward keeping risk relatively low. The EEMV does this primarily through sector allocations. While tech and finance companies still play a big role, as in other funds, the top picks tend to be more entrenched companies. Case in point: $190 billion chipmaker Taiwan Semiconductor Manufacturing (TSM) makes the top five. There also is more attention paid to low-risk industries that provide reliable cash flows, like telecommunications.
SPDR S&P Emerging Markets Dividend ETF (EDIV)
Speaking of entrenched emerging markets plays, what if you’re looking to play the biggest names in these regions for long-term returns and potential income? If you are, take a look at the EDIV. The fund delivers a roughly 3.8 percent yield, which is almost twice what the typical domestic large-cap fund will pay you right now. An added plus for risk-averse investors looking for long-term returns: EDIV rebalances regularly with a mandate that no single company can be allocated at more than 3 percent of the total portfolio.
iShares MSCI Frontier 100 ETF (FM)
Of course, you may be wondering why we still consider China an emerging market when it’s second only to the U.S. in terms of gross domestic product. Isn’t the biggest opportunity in a region like this mostly in the rearview mirror? If you’d prefer to get in on the ground floor of the next generation of emerging markets, then consider the FM. The top three regions this fund targets are Kuwait, Argentina and Vietnam — smaller and much more volatile nations, yes, but also ones that theoretically have the highest ceiling for future growth. This is a far more aggressive play, but potentially a more rewarding one.
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7 Emerging Market ETFs to Buy Now originally appeared on usnews.com
