Recent studies of emerging markets show their investment opportunities may be greater than most investors realize. One study believes that by 2020 the aggregate GDP of emerging markets will overtake that of developed economies around the world. Another one has the number of global consumers hitting 1.8 billion by 2025, with the majority of them living in emerging markets. Lastly, it is believed consumer spending in emerging markets will grow three times faster than that of developed markets in the coming years.
All three of these stats indicate there could soon be a huge growth opportunity in developing markets around the world. But there are a lot of emerging market ETFs that are down more than 9% year-to-date while the SPDR S&P 500 ETF (SPY) is up more than 10% and hitting new all-time highs. With that being said, many experts are beginning to grow weary of U.S. equities as we have now set a new record regarding the length of our current bull-market and valuations appear to be stretched.
When we take all of this into consideration, moving money to emerging market funds now may turn out to be a good long-term asset allocation play. So, let's take a look at a few funds which look appealing due to their rough 2018.
The first two are the Vanguard FTSE Emerging Markets ETF (VWO) and its direct competitor the Schwab Emerging Markets Equity ETF (SCHE). Both of these funds are large, liquid and have low fee’s; 0.14% and 0.13% respectively. They also both don’t consider South Korea an emerging market but hold positions based in Hong Kong, Taiwan, India, China, South Africa, Brazil, Russia, and Mexico to name the top 8 countries based on holdings. Both have an index weighting based on market cap and have a weighted market cap of around $80 billion, meaning you’re getting great foreign large-cap exposure. Continue reading "Emerging Market ETFs Could Offer Great Opportunities" →