Top Emerging Markets Stock Bond ETFs

Top Emerging Markets Stock Bond ETFs explained by professional forex trading experts the “ForexSQ” FX trading team.

Top Emerging Markets Stock Bond ETFs

Emerging markets have become a popular way to diversify a portfolio and increase exposure to fast-growing economies around the world. While there are more than 100 emerging market exchange-traded funds (ETFs), only a handful of them have over $1 billion in assets under management and enough liquidity for retail investors to feel comfortable.

1- Vanguard FTSE Emerging Markets ETF (VWO)

The Vanguard FTSE Emerging Markets ETF (VWO) is the most popular emerging markets equity ETF by assets with an expense ratio of just 0.15 percent and more than 4,000 holdings. Investors should consider the ETF for low-cost exposure to mostly large-cap emerging market equities.

2- iShares MSCI Emerging Markets ETF (EEM)

The iShares MSCI Emerging Markets ETF (EEM) is the second most popular emerging markets equity ETF by assets with an expense ratio of 0.67 percent and nearly 1,000 holdings. While the ETF is more expensive than VWO, it provides more concentrated exposure to larger companies.

3- iShares Core MSCI Emerging Markets ETF (IEMG)

The iShares Core MSCI Emerging Markets ETF (IEMG) is the third most popular emerging markets equity ETF by assets with an expense ratio of just 0.14 percent and nearly 2,000 holdings. The newer ETF — launched in 2012 — offers exposure to more medium- and mid-sized firms.

4- iShares MSCI Emerging Markets Minimum Volatility ETF (EEMV)

The iShares MSCI Emerging Markets Minimum Volatility ETF (EEMV) is a popular ‘min-vol’ ETF focused on emerging markets with an expense ratio of 0.25 percent and about 250 holdings. Investors seeking low volatility investments may want to consider this option for exposure to the space.

5- Schwab Emerging Markets Equity ETF (SCHE)

The Schwab Emerging Markets Equity ETF (SCHE) is the lowest cost emerging markets ETF with an expense ratio of 0.13 percent and over 800 holdings. Investors looking for the lowest cost option may want to consider this ETF in lieu of the others in the space.

6- WisdomTree Emerging Markets High Dividend Fund (DEM)

The WisdomTree Emerging Markets High Dividend Fund (DEM) is a popular dividend-focused ETF targeting emerging markets with an expense ratio of 0.63 percent and about 300 holdings. Income investors may want to consider the ETF to maximize their portfolio’s dividend yield.

7- iShares JP Morgan USD Emerging Markets Bond ETF (EMB)

The iShares JP Morgan USD Emerging Markets Bond ETF (EMB) is the most popular emerging market bonds ETF by assets with an expense ratio of 0.6 percent and about 300 holdings. Investors looking for broad exposure to emerging market bonds should consider it.

8- PowerShares Emerging Markets Sovereign Debt Portfolio ETF (PCY)

The PowerShares Emerging Markets Sovereign Debt Portfolio ETF (PCY) is the second most popular emerging market bond ETF with an expense ratio of 0.5 percent and about 80 holdings. Investors looking for the lowest cost exposure should invest in the fund.

9-VanEck Vectors JP Morgan EM Local Currency Bond ETF (EMLC)

The VanEck Vectors JP Morgan EM Local Currency Bond ETF (EMLC) provides investors with exposure to local currency with a 0.47 percent expense ratio and about 260 holdings. Investors looking to avoid currency hedges should consider the ETF for their portfolio.

More ETFs and Important Notes

There are over 100 other emerging market ETFs for investors to choose from, but their limited assets under management and daily volume introduce some risks. Investors looking for unique exposure to emerging markets, such as small-cap exposure to value-based exposure, may want to consider some of these alternatives. But, most investors looking for broad exposure are best off with low-cost funds that are weighted by market capitalization. When looking at any emerging market ETFs, investors should carefully consider several factors before investing. An ETF’s expense ratio represents the most ‘controllable’ element of total returns, which means that most investors should seek out low-cost funds. Investors should also consider these ETFs’ exposure to countries that may be experiencing difficulties, such as Russia and the Middle East when crude oil prices are low. Most experts recommend a modest exposure to emerging markets in their portfolios given their high level of risk and volatility. Younger investors may want to consider higher allocations to these riskier investments, while older investors approaching retirement may want to limit their exposure to a small amount of emerging market bond ETFs for fixed income.