Yahoo Finance 9 Global Growth ETFs to Diversify Your Portfolio
The world presents potential for ETF investors.
Though talk of global trade wars continues, it's fundamentally true that many nations are on a path to long-term growth regardless of short-term policy decisions. From the rise of China's tech and service sectors to the growth of the middle class in Latin America, the global economy continues to grow -- and in many cases, smaller marketplaces are leading the charge. There is more risk in these regions, of course, thanks to governments or local currencies that may not be as stable. However, there is significantly more potential as these nations modernize and their population gets wealthier. Here are nine exchange-traded funds to invest in this global growth trend.
Vanguard FTSE Emerging Markets ETF (ticker: VWO)
The largest emerging markets ETF by assets, VWO boasts some $64 billion under management. There's good reason for this, as this Vanguard fund offers a rock-bottom fee structure that charges 0.12% in annual expenses. That's a mere $12 annually on every $10,000 invested -- an incredibly small figure for exposure to foreign stocks some investors may not have even heard of, and would have trouble buying on their own. The portfolio is broad, with some 4,600 components, but it's worth noting that it is a bit top-heavy with almost half its exposure in China and nearby Taiwan.
iShares Edge MSCI Min Vol Emerging Markets ETF (EEMV)
Though the name is a bit of a tongue twister, the important stuff in the label on this ETF is "min vol," which stands for minimum volatility. That means this fund is designed to give exposure in a way that is less aggressive and not as prone to sudden, huge moves. The list of components is smaller than VWO, with around 2,300 picks. And most of them are the bigger names that you may already know, such as Asian e-commerce giant Alibaba Group Holding (BABA), since these larger companies tend to have more stability. Still, there is plenty of growth potential in EEMV despite its bias toward less volatile stocks.
Schwab Fundamental Emerging Markets Large Company Index ETF (FNDE)
Another twist on the typical emerging market fund is FNDE, which layers on fundamental screening techniques to seek the companies that stand above their peers in metrics that include profitability or revenue growth. That focus on growth gives this ETF a very different look than EEMV, which tends to be more concerned with stability. For instance, top holding in this Schwab fund is state-owned Russian oil giant Gazprom (OZGPY) instead of the larger Chinese mega-caps that tend to dominate other emerging market ETFs.
WisdomTree Emerging Markets Equity Income Fund (DEM)
This WisdomTree fund tracks dividend-yielding companies in the emerging markets region. Much like domestic stocks, foreign dividend payers tend to be much more stable because investors buy shares for the long term with the goal of income. And, the steady revenue that supports regular dividends tends to make performance more reliable in these stocks. Examples of holdings include the massive government-run financial firm China Construction Bank Corp. (CICHY) and Russian oil and gas giant Tatneft (OAOFY) -- stocks in the same income-generating sectors as U.S. dividend payers with a bit more growth potential than entrenched domestic blue chips. DEM yields about 4.8%.
WisdomTree Emerging Markets SmallCap Dividend Fund (DGS)
A similar fund from WisdomTree is this emerging markets fund with a focus on smaller dividend stocks. This allows for a focus on the more growth names in the region that have a lot of room to run. However, the presence of a consistent dividend means that these smaller companies are not fly-by-night operations that skirting disaster. This is a more aggressive fund, to be sure, but it also has a bit more potential reward. And thanks to the makeup of small stocks with big dividends, it also yields an impressive 5.5% based on its current holdings and its recent payout history.
SPDR S&P Emerging Small Cap ETF (EWX)
If you want the growth potential of developing global small-caps without the income angle, then this SPDR fund is a good option. The ETF is diversified across companies that are modest in size, with no single holding representing more than about 0.6% of the portfolio and a list of 1,400 names in total. Sector breakdowns are also fairly balanced, with tech representing the biggest share at about 17% and consumer discretionary at No. 2 with about 15% of total assets. Smaller stocks are more risky, but for investors seeking the true profit potential of emerging markets it may be worth looking at companies on the ground floor of growth in these regions.
Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM)
Taking a more active approach, this Goldman Sachs-backed fund follows a performance-seeking methodology that uses quantitative screens to filter out the stocks that are laggards and focus instead on picks with share price momentum and attractive valuation. That currently resulted in a big focus on emerging market financials, which represent about 25% of the entire portfolio. While there's no guarantee that these screens will always work, of course, this ETF is worth a look by investors interested in being a bit more responsive to global risks and opportunities in the near-term.
iShares China Large-Cap ETF (FXI)
While all these funds slice emerging markets in different ways, they all share one commonality: Chinese stocks represent a significant part of the overall portfolio. That's as it should be, since this is a key region, but it's worth wondering whether you simply want to go directly into China with your investments and skip other regions. That's what FXI offers, as the largest China-specific ETF by assets under management. The portfolio is reliant on big-name Chinese stocks you likely have already heard of, including tech giant Tencent Holdings (TCHEY). However, it's a great single holding to gain exposure to what is increasingly an important region in the world for investors.
iShares MSCI Frontier 100 ETF (FM)
Some investors are not that interested in China, Russia or Brazil -- widely followed emerging markets that are "emerged" in the minds of many on Wall Street, with some stocks that are just as big as U.S. blue chips and operate as independent multinationals. If you really want to play the growth potential of up-and-coming markets, then the Frontier 100 could be a better bet. Countries covered by the ETF include Kuwait, Vietnam, Romania and Morocco. These regions carry more risk and the stocks are assuredly more volatile. However, if you're seek a more direct play on growing regions rather than the same old markets, FM is a way to do it.
Global growth ETFs to buy now.
-- Vanguard FTSE Emerging Markets ETF (VWO)
-- iShares Edge MSCI Min Vol Emerging Markets ETF (EEMV)
-- Schwab Fundamental Emerging Markets Large Company Index ETF (FNDE)
-- WisdomTree Emerging Markets Equity Income Fund (DEM)
-- WisdomTree Emerging Markets SmallCap Dividend Fund (DGS)
-- SPDR S&P Emerging Small Cap ETF (EWX)
-- Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM)
-- iShares China Large-Cap ETF (FXI)
-- iShares MSCI Frontier 100 ETF (FM)
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