The best emerging markets ETFs

A properly diversified portfolio should include businesses from all over the world. Valuation wise, stocks in developing countries are currently much cheaper than in North America. So in today’s post I’ll go over several emerging markets ETFs to consider adding to your portfolio.

VWO and IEMG

The Vanguard FTSE Emerging Markets ETF has a low management fee of 0.10% and over $100 billion of assets. It trades in the U.S. under the ticker (VWO) and in Canada under (VEE)

The iShares Core MSCI Emerging Markets ETF is another good option if you want to own some South Korean companies as well. The ticker is (IEMG) in the U.S. and (XEC) in Canada.

If you want to know more about the differences between VWO and IEMG you can watch my recent video here. I also discuss alternative EM funds that have a dividend or small cap tilt.

 

Emerging markets with or without China

China’s economy has slowed down, and many analysts are concerned about increasing regulations.

Do you know what happened to Alibaba founder Jack Ma after he criticized the central government?

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Regular citizens are affected as well. Employees from the education and high tech sectors have seen the value of their stock holdings plummet, wiping out savings practically overnight.

This year alone, the Chinese government has implemented the following new rules.

  • Ban tutoring companies from making profits.
  • Restrict online video game usage to 3 hours a week for anyone under 18 years old.
  • Increase regulation of celebrities, and their fans.
  • Crackdown on technology companies.

As a result of increasing government intervention the Chinese stock market has way underperformed the S&P 500 lately.

 

International investors are left with 2 choices. Either this pull back in Chinese stocks represents an opportunity to buy companies on sale, OR China will forever be an environment associated with regulatory uncertainty and is not worth investing in.

As usual, it’s a good idea to consider the choice from a long term perspective. If you think the Chinese stock market will grow over the next 10 years then investing in a diversified emerging market ETF would be an appropriate choice. Chinese companies make up a very generous portion of VWO for example.

VWO is one of the best emerging markets ETFs due to its low cost structure.

On the other hand, if you don’t want to invest in China, then other options exist. For example, (EMXC) is the iShares MSCI Emerging Markets ex China ETF. This fund gives you exposure to emerging markets excluding China.

Ether way, there is something for everyone. ๐Ÿ™‚

 

My EM strategy moving forward

Personally I plan to increase my exposure of emerging market stocks by selling put options on VWO with a Delta of around -20%. I will build up my emerging market investment until it’s worth about 10% of my liquid portfolio.

Earlier this year I made the case for why investors should look at emerging markets. It’s because that’s where most of the economic growth will most likely come from in the future. The U.S. is great at consuming, but over the long run I’m looking at which country is great at producing.

Thankfully the barrier to invest globally is now lower than ever thanks to afordable trading commissions, and a variety of ETF options. ๐Ÿ™‚

 

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David @ Filled With Money
09/07/2021 6:34 pm

Would you recommend emerging markets portfolio over the S&P 500 for a portion of one’s portfolio? I saw that emerging markets weren’t doing so well when compared to the S&P for 2021 when taking Personal Capital’s word into account.

However, I have no idea which emerging markets they are measuring so it’s always a hit or miss.

SavyFox
09/10/2021 12:56 pm

Hi Liquid
Good post, and good timing. Emerging markets caught my eyes, in particular India and China. I am holding some Alibaba stocks and have some exposure to Tencent via Prosus. Have been thinking of adding to my positions, but an ETF could be a good way to diversify more in Emerging markets.
Cheers

GYM
GYM
09/11/2021 10:11 pm

I have VEE. My husband has recently been buying $BABA in our joint investment accounts, haha. Will be interesting to see how that pans out.

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maplethrift
09/15/2021 7:24 am

when it comes to the USD and CAD versions of the same ETF they’re also traded on different exchanges? I know they are charged in different currencies but are they also traded on their respective exchanges? in terms of Jack Ma, I think he made the smart move to step down and shut his mouth before things got out of hand lol, the thing with the Chinese government can be a full time university degree but I can’t say I didn’t see the online education ban coming, it was only a matter of time.. the social structure in China is very different, you have entrance exams for junior and high schools and of course college. So, if you suck academically, like me lol, you will need to get “points” from other areas – this could be easily referenced by Jeremy Lin; he went to Harvard on full scholarship cuz he played basketball, of course, I’m not saying his grades suck but being able to lead the Harvard team to their conference tournament does play a role. Back to my point, since there’s already many gaps Chinese parents can exploit when it comes to getting their children education, having online tutoring… Read more ยป