what is emerging marketi etf

What are emerging market ETF? All you need to know

Before moving to what emerging market ETF is, let’s quickly learn what emerging markets are, their characteristics, and why they should be acknowledged whilst making a portfolio. 

Emerging markets are countries that are increasing their manufacturing capabilities. They are moving away from agriculture and raw material exports, which were once their main sources of income. 

Governments in emerging countries want to improve the lives of their citizens. They are fast industrializing and transitioning to a mixed economy or free market. Brazil, China, India, Russia, etc., are some examples of emerging economies. 

The essential characteristics of emerging economies are 

Emerging Market ETF

What does this mean? 

Emerging Market ETF

There are numerous ways to profit from emerging markets’ high growth rates and prospects. The best option is to invest in a fund that focuses on emerging markets.  

Many funds either track the MSCI Index or strive to outperform it. This helps save a load of effort. It is unnecessary to conduct extensive research into foreign firms and economic policies.  

It also lowers risk by distributing investments across various emerging markets rather than just one. 

However, emerging markets are not all equal in terms of investment potential. Since the global financial crisis of 2008, some countries have used rising commodity prices to boost their economies.  

They did not put money into infrastructure. Instead, surplus funds are used to fund subsidies and new government employees. As a result, their economies grew swiftly, their citizens bought a lot of imported goods, and inflation became a problem immediately. 

Brazil, Hungary, Malaysia, Russia, South Africa, Turkey, and Vietnam. Governments can encourage foreign direct investment by keeping interest rates low. 

It was well worth it, even if it did assist in raising inflation. The countries received tremendous economic growth in exchange. 

Emerging market funds are mutual funds or exchange-traded funds that invest in publicly traded companies based in an emerging country or region.  

Funds might target specific geographic areas or invest in a single country. While an emerging market fund does not have to invest solely in developing markets, it should have most of its holdings in that sector.  

The remaining holdings could be more extensive domestic holdings that make capital investments in the economy’s development. As Hyundai has made significant investments in plants in India, an emerging market fund investing in India may also hold Hyundai stocks. 

Emerging Markets ETFs have $330.14 billion in assets under management, with 233 ETFs trading on US exchanges. The cost-to-income ratio is 0.58 percent on average.  

With $79.22 billion in assets, the Vanguard FTSE Emerging Markets ETF VWO is the largest Emerging Markets ETF. MEXX, the best-performing Emerging Markets ETF in the previous year, returned 80.89 percent.  

The VanEck Digital India ETF DGIN was the most recent ETF to launch on February 15, 2022. 

Let’s see top emerging market ETF issuers by AUM. 
IssuerAUM in $ billionNumber of funds
Blackrock Financial Management112.4014
State Street7.124
Charles Schwab13.892
First Trust0.645
Let’s now look at some top and bottom performers in the category of ETFs.
Top ETF Performers according to etf.com 
TickerFund NameTrailing 30-days price TR change
YANGDirexion Daily FTSE China Bear 3X Shares28.44%
FXPProShares UltraShort FTSE China 5018.58%
EDZDirexion Daily MSCI Emerging Markets Bear 3x Shares17.37%
CHIEGlobal X MSCI China Energy ETF15.04%
BRZUDirexion Daily MSCI Brazil Bull 2X Shares13.19%
Bottom ETF Performers according to etf.com
TickerFund NameTrailing 30-days price TR change
RUSLDirexion Daily Russia Bull 2X Shares-85.12%
RSXVanEck Russia ETF-70.31%
FLRUFranklin FTSE Russia ETF-59.40%
RSXJVanEck Russia Small-Cap ETF-44.38%
YINNDirexion Daily FTSE China Bull 3X Shares-24.81%

Emerging markets offer investors a great way to diversify their portfolios without sacrificing growth.  

While the investments are more volatile, the underlying firm frequently enjoys significant growth as the new market grows. Before investing in emerging economies, investors should do their homework.

Consult an expert advisor to get the right plan for you 

Add comment

Your email address will not be published.