What is the best way to get exposure to emerging markets?
Investing in individual emerging markets stocks is difficult for the average investor, so mutual funds and ETFs are often the most effective way to do it. Look for funds with high assets under management.
Most experts agree the term “emerging market investments” refers to countries or regions undergoing fast economic growth. A formula using a country's gross domestic product (GDP) and per capita income is often used to determine if a country is an emerging market.
- Vanguard FTSE Emerging Markets ETF (VWO).
- iShares Core MSCI Emerging Markets ETF (IEMG).
- Schwab Emerging Markets Equity ETF (SCHE).
- SPDR Portfolio Emerging Markets ETF (SPEM).
- Take a phased approach to understanding the opportunity afforded by new markets. ...
- Step away from the generalisations. ...
- Assessing new markets – 5 key considerations. ...
- Look for leapfrog opportunities. ...
- Remember, e-commerce is not the same everywhere. ...
- Understand the technicalities of new markets.
| Country | GDP Growth | Growth in FDI Projects (CAGR '21-'23) |
|---|---|---|
| 🇰🇭 Cambodia | 6.1% | 110% |
| 🇵🇭 Philippines | 5.9% | 51% |
| 🇰🇪 Kenya | 5.3% | 50% |
| 🇮🇶 Iraq | 2.9% | 95% |
The Five Major Emerging Markets. Brazil, Russia, India, China, and South Africa are the biggest emerging markets in the world.
Top Emerging Countries
BRIC countries or Brazil, Russia, India and China. These countries are currently considered the top four emerging markets.
The 10 Big Emerging Markets (BEM) economies are (alphabetically ordered): Argentina, Brazil, China, India, Indonesia, Mexico, Poland, South Africa, South Korea and Turkey. Egypt, Iran, Nigeria, Pakistan, Russia, Saudi Arabia, Taiwan, and Thailand are other major emerging markets.
Vanguard Emerging Market ETFs track the entire spectrum of stocks domiciled in nations classified as emerging by one or more of the main indexing authorities.
Investing in emerging market ETFs can sometimes be risky, as emerging markets can see a steep fall at times. Emerging markets can sometimes be heavily influenced by global developments, thus, making them much volatile.
What drives growth in emerging markets?
Technology, sustainability, trade and wealth – all of these trends will be integral to the development of emerging markets. Businesses and investors operating in these dynamic economies will be more likely to succeed by recognising the opportunities presented by these new growth drivers.
When basic caution is exercised, the rewards of investing in an emerging market can outweigh the risks. Despite their volatility, the most growth and the highest-returning stocks are going to be found in the fastest-growing economies.
One of the key sectors to benefi from the higher economic growth in emerging markets is the consumer-products sector. This is because the rising middle class consumers in these markets yearn for consumer goods such as tooth paste, household cleaning products, health and beauty products, appliances, instant foods, etc.
Important information: The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Emerging markets have underperformed their developed counterparts for around a decade, with the trend continuing in 2023 despite the robust economic growth1.
We believe we are currently in the second year of “easier” returns in EMD, following a challenging 2022 across all fixed income asset classes. Last year, EMD returned 10% to 12%, and we expect similar results in 2024. By 2025, we anticipate returns to normalize closer to the yield of the asset class.
The Next Eleven (or N-11) are eleven countries—Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey, and Vietnam— identified by Goldman Sachs investment bank as having a high potential of becoming the world's largest economies in the 21st century along with the BRICs.
Free and fair competition is to be welcomed, but the pressure on companies to win big contracts in emerging markets has led to bribery, violations of OECD trade-financing agreements, and escalation of political pressure by home governments on those awarding contracts.
- eCommerce.
- Online education.
- The health and fitness industry.
- The home improvement industry.
- The pet care industry.
- Travel and tourism.
- Invest in your future.
- Get a loan and start your business.
| GDP PPP rankings | 2016 rankings | 2030 rankings |
|---|---|---|
| 1 | China | 38008 |
| 2 | United States | 23475 |
| 3 | India | 19511 |
| 4 | Japan | 5606 |
A third consecutive monthly acceleration in global output growth was supported by faster emerging market expansion while developed markets also returned to growth for the first time in six months.
How much should I have in emerging markets?
In short, a review of the three standard approaches to EM allocation suggest global equity investors should allocate somewhere in the range of 13% to 39% to EM. Source: FactSet, MSCI, MSIM calculations.
Vanguard's active fixed income team believes emerging markets (EM) bonds could outperform much of the rest of the fixed income market in 2024 because of the likelihood of declining global interest rates, the current yield premium over U.S. investment-grade bonds, and a longer duration profile than U.S. high yield.
The MSCI Emerging Markets Index consists of 24 emerging-market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
Emerging market stocks are those that represent companies that are operating in developing economies. These economies have the potential for rapid economic growth and an expanding middle class with increased discretionary income.
However, if you know that you'd like a bit more exposure to smaller and medium-sized companies or just want to invest in more stocks overall, VTI is your best bet. VOO, meanwhile, is the better option for investors who want to focus heavily on large cap companies.
