8 Best Emerging Market ETFs: Top Funds by Performance

Investing in emerging markets can offer significant growth opportunities as these economies expand and develop. Exchange-Traded Funds (ETFs) focusing on emerging markets provide investors with diversified exposure to a range of sectors and countries. Below, we explore eight of the best-performing emerging market ETFs, detailing their strategies, performance metrics, and key features.

1. Vanguard FTSE Emerging Markets ETF (VWO)

Overview

The Vanguard FTSE Emerging Markets ETF (VWO) tracks the FTSE Emerging Markets All Cap China A Inclusion Index. This ETF includes large-, mid-, and small-cap stocks from various emerging markets, giving investors broad exposure across different sectors.

Performance

VWO has consistently delivered strong returns, particularly during periods of economic recovery. With an expense ratio of just 0.06%, it is one of the most cost-effective options in the emerging markets space. Its diversified portfolio reduces country-specific risks, making it an attractive choice for investors looking for long-term growth.

Key Holdings

VWO includes significant allocations to countries like China, India, and Brazil, with top sectors such as technology, financials, and consumer discretionary driving performance.

2. iShares MSCI Emerging Markets ETF (EEM)

Overview

The iShares MSCI Emerging Markets ETF (EEM) seeks to track the MSCI Emerging Markets Index, featuring large and mid-cap stocks from 26 emerging market countries.

Performance

EEM has been a cornerstone in many investors’ portfolios due to its liquidity and comprehensive market coverage. With an expense ratio of 0.68%, it may be higher than some competitors, but its liquidity often justifies the cost. EEM is known for its solid historical performance, especially in periods of economic recovery in emerging markets.

Investment Strategy

The ETF’s strategy includes a diverse range of sectors, with technology and financial services often leading in performance. EEM is favored by those looking to capitalize on the growth potential of emerging markets while maintaining a diversified approach.

3. Schwab Emerging Markets Equity ETF (SCHM)

Overview

The Schwab Emerging Markets Equity ETF (SCHM) aims to track the performance of the FTSE Emerging Index, focusing on large- and mid-cap stocks.

Performance

SCHM stands out for its low expense ratio of 0.11%, making it an appealing choice for cost-conscious investors. It has delivered robust returns, particularly in a recovering market environment, and its diversified approach helps mitigate risks associated with specific countries or sectors.

Unique Features

SCHM’s focus on established companies within emerging markets allows for a relatively stable investment, attracting those looking for a balance between growth and risk.

4. Invesco S&P Emerging Markets Low Volatility ETF (EEMV)

Overview

The Invesco S&P Emerging Markets Low Volatility ETF (EEMV) targets low-volatility stocks within the S&P Emerging Markets Index, offering a defensive investment strategy.

Performance

EEMV is particularly appealing for risk-averse investors, as it has historically outperformed during market downturns. Its expense ratio of 0.25% is reasonable given its focus on stability and lower volatility.

Defensive Strategy

By selecting stocks with lower price volatility, EEMV aims to provide a smoother investment experience, making it an excellent choice for those concerned about the risks associated with emerging markets.

5. iShares Core MSCI Emerging Markets ETF (IEMG)

Overview

The iShares Core MSCI Emerging Markets ETF (IEMG) offers exposure to a broader range of emerging market stocks, including small-cap companies, through the MSCI Emerging Markets Investable Market Index.

Performance

IEMG has shown strong performance, benefiting from its extensive diversification across different market capitalizations. With a low expense ratio of 0.11%, it is appealing for long-term investors seeking comprehensive exposure.

Growth Potential

By including small-cap stocks, IEMG provides the potential for higher growth, as these companies often have more room to expand compared to their larger counterparts.

6. Franklin FTSE Brazil ETF (FLBR)

Overview

The Franklin FTSE Brazil ETF (FLBR) focuses specifically on Brazilian equities, tracking the FTSE Brazil RIC Index, making it ideal for investors with a bullish outlook on Brazil.

Performance

Brazil’s market dynamics have propelled FLBR’s returns, particularly during periods of rising commodity prices. With an expense ratio of 0.19%, it represents a compelling option for those looking to concentrate their investments in the Brazilian market.

Sector Focus

FLBR’s holdings are heavily weighted towards sectors such as financials and materials, which are vital to the Brazilian economy, allowing investors to capitalize on local economic trends.

7. SPDR S&P Emerging Markets Dividend ETF (EDIV)

Overview

The SPDR S&P Emerging Markets Dividend ETF (EDIV) focuses on high-dividend-yielding stocks in emerging markets, tracking the S&P Emerging Markets Dividend Opportunities Index.

Performance

For income-focused investors, EDIV offers a unique combination of growth potential and dividend income. With an expense ratio of 0.40%, it provides an attractive yield compared to many other emerging market ETFs.

Income Generation

EDIV is particularly suitable for investors looking for consistent income, as it invests in companies that regularly pay dividends, which can help cushion against market volatility.

8. iShares Asia 50 ETF (AIA)

Overview

The iShares Asia 50 ETF (AIA) focuses on the largest 50 companies in Asia, including those from emerging markets like China, India, and Taiwan.

Performance

AIA has shown strong performance, capitalizing on the growth of major Asian economies. With an expense ratio of 0.47%, it offers a focused approach to investing in key Asian markets.

Strategic Exposure

By concentrating on the largest firms in the region, AIA provides investors with exposure to well-established companies that are leaders in their respective industries, making it a solid choice for those looking to tap into Asian growth.

Conclusion

Investing in emerging market ETFs can provide substantial growth potential and diversification benefits. The eight ETFs listed above represent some of the best options based on performance, expense ratios, and focus areas. Each fund offers a unique strategy, catering to different investor needs—from broad market exposure to specific country focuses. As always, investors should assess their risk tolerance and investment goals before entering these dynamic markets. With careful consideration and due diligence, emerging market ETFs can play a vital role in a well-rounded investment portfolio.