Through research, Christopher discovers that, despite their claims, active mutual fund managers charge high fees while consistently underperforming their benchmarks. Gaining exposure through ETFs is a better solution, but which ones?
To minimize issues with liquidity and portfolio concentration, Christopher should start with one of the larger ETFs that specializes in the emerging markets.
The most popular ETF is the $26 billion iShares MSCI Emerging Markets Index Fund (EEM) which tracks an index that captures 85% of the market capitalization of the emerging markets. Vanguard has a similar offering with a lower expense ratio of only 0.25% – the $7 billion Vanguard Emerging Markets ETF (VWO).
Once he has a broad based position established, Christopher can look into ETFs that specialize by country, sector or asset class. For example,Van Eck Global recently launched the Market Vectors Brazil Small-Cap ETF (BRF) while WisdomTree introduced the WisdomTree Dreyfus Emerging Currency Fund (CEW).
Additional portfolio suggestions are available in the special report Investing in Emerging Markets with Exchange Traded Funds.