Investing in emerging market ETFs can provide high returns through rapid growth, rising earnings, and attractive valuations, making them a strong choice for portfolio diversification. Hence, robust emerging market ETFs: Vanguard Emerging Markets Stock Index Fund (VWO), iShares MSCI Emerging Markets ETF (EEM), and Schwab Emerging Markets Equity ETF (SCHE) are must-buys this August 2024.
Emerging markets (EMs) are set for moderate growth in 2024, with strong domestic demand boosting most economies. However, risks include delayed U.S. interest rate cuts and policy uncertainties in several countries. While growth will vary, with some countries like Brazil and India slowing down and others like Chile and Peru improving, overall investment remains promising.
Meanwhile, the global economy is on a moderate growth trajectory, with the IMF forecasting 3.2% growth in 2024. While advanced economies struggle, emerging markets stand out. Despite some mixed performance and uncertainties, these ETFs offer strong growth potential in these regions and are a great option for diversifying global portfolios.
Moreover, emerging market ETFs are increasingly attractive due to global monetary easing, offering strong growth potential despite risks like political instability and currency fluctuations. Investing in these ETFs can enhance portfolio stability and growth, particularly as lower interest rates boost technology stocks, making them a valuable opportunity.
Given these trends, let’s evaluate the fundamentals of the three emerging market ETFs mentioned above.
Vanguard Emerging Markets Stock Index Fund (VWO)
VWO is an exchange-traded fund launched and managed by The Vanguard Group, Inc. It invests in the public equity markets of global emerging regions. It invests in stocks of companies operating across diversified sectors. It invests in growth and value stocks of companies across diversified market capitalizations. The fund seeks to track the performance of the FTSE Emerging Markets All Cap China A Inclusion Index by using a representative sampling technique.
With $78.31 billion in assets under management (AUM), VWO’s top holding is Taiwan Semiconductor Manufacturing Company Limited (TSM) with an 8.29% weighting, followed by Tencent Holdings Limited (TCEHY), with a 3.42% weighting, and Alibaba Group Holding Limited (BABA), with 1.97%. It has a total of 4,830 holdings.
It has an expense ratio of 0.08%, lower than the category average of 0.50%. It currently has a NAV of $44.73. Moreover, VWO’s 5-day fund inflows came in at $3.08 million.
The fund’s annual dividend of $1.40 yields 3.12% on the current share price. Its four-year average yield is 3.02%. VWO’s dividend payouts have increased at a CAGR of 9.2% over the past three years and 5.1% over the past five years.
VWO has gained 12.2% over the past year and 10.4% over the past nine months to close the last trading session at $44.78.
VWO’s POWR Ratings reflect this promising outlook. The VWO’s overall A rating equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
VWO has an A grade for Buy & Hold and Trade and a B for Peer. Of the 101 ETFs in the A-rated Emerging Markets Equities ETFs group, it is ranked #2. Click here to access all of VWO’s POWR Ratings.
iShares MSCI Emerging Markets ETF (EEM)
EEM is an exchange-traded fund launched by BlackRock, Inc. The fund is managed by BlackRock Fund Advisors. It invests in the public equity markets of emerging regions worldwide, focusing on stocks of companies across various sectors. The fund targets growth and value stocks of companies with diverse market capitalizations. It aims to track the performance of the MSCI Emerging Markets Index using a representative sampling technique.
With $17.87 billion in AUM, the fund has a total of 1,209 holdings. EEM’s top holding is TSM with a 9.76% weighting, followed by TCEHY with a 4.09% weighting, and BABA with 2.10%.
EEM has an expense ratio of 0.70%, lower than the category average of 0.50%. It currently has a NAV of $43.65. Its fund outflows came in at $395.55 million over the past three months.
The fund’s annual dividend of $1.04 yields 2.38% on the current share price. Its four-year average yield is 2.21%. Its dividend payouts have increased at a CAGR of 11% over the past three years and 3% over the past five years.
EEM has gained 9.9% over the past nine months and 13.1% over the past year to close the last trading session at $43.49.
EEM’s strong outlook is reflected in its POWR Ratings. The ETF has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Buy & Hold and Trade. It is ranked #3 in the Emerging Markets Equities ETFs group. To access all the POWR Ratings for EEM, click here.
Schwab Emerging Markets Equity ETF (SCHE)
SCHE is an exchange-traded fund launched and managed by Charles Schwab Investment Management, Inc. It invests in the public equity markets of emerging regions worldwide, focusing on stocks of companies across various sectors. The fund targets growth and value stocks of companies with diverse market capitalizations. It aims to track the performance of the FTSE Emerging Index using a representative sampling technique.
With $9.11 billion in assets under management (AUM), SCHE’s top holding is TSM with a 9.65% weighting, followed by TCEHY, with a 3.94% weighting, and BABA, with 2.31%. CIBR has a total of 1,980 holdings.
SCHE has an expense ratio of 0.11%, lower than the category average of 0.50%. It currently has a NAV of $27.21. Its fund outflows came in at $73.95 million over the past six months.
The ETF pays an annual dividend of $0.86, which yields 3.13% on the current price. SCHE has a four-year average dividend yield of 2.91%. Its dividend payouts have increased at a CAGR of 5.2% over the past three years and 1.5% over the past five years.
SCHE has gained 12.7% over the past year and 10.1% over the past nine months to close the last trading session at $27.25.
SCHE’s POWR Ratings reflect its promising prospects. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system.
SCHE has an A grade for Buy & Hold, Peer, and Trade. In the Foreign Large Cap Blend ETFs, it is ranked #9 out of 75 ETFs. Click here to access all of SCHE’s POWR Ratings.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
VWO shares were trading at $44.44 per share on Thursday afternoon, down $0.52 (-1.16%). Year-to-date, VWO has gained 8.64%, versus a 17.82% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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