Emerging Market ETF

Reviewed by Vineeth | Updated on Aug 26, 2020

Introduction

These are the ETFs focusing on the stocks traded in emerging countries such as India, Thailand, and Brazil. These funds are passively managed to track an underlying index. The underlying index being tracked by the ETFs of emerging markets differs across fund managers. However, these ETFs are managed passively and contain stocks from different countries.

Understanding Emerging Market ETF

The emerging-market ETFs invest in stocks traded in the emerging markets. These stocks have the potential to offer excellent returns in the long run. The fund manager would identify the stocks based on growth opportunities for investors.

Emerging market ETFs are ideal for investors having a long-term investment horizon. These investors cannot afford to miss out on the excellent opportunity that these ETFs offer. Emerging markets are capable of providing very high returns as they have a scope for development, unlike the markets in the developed nations. Generally, the emerging nations are known for their excessive natural resources that are consumed extensively by the developed countries.

No doubt that emerging markets offer an excellent opportunity for capital appreciation over time, but these markets also enter a steeping learning phase. These markets are extremely sensitive to the geopolitical factors and hence are highly volatile. Emerging market investors may look at a particular part of emerging markets on the basis of regional affinity or the class of assets.

Investors must note that there are several risks that come attached to the emerging market ETFs. These markets can be more exposed to volatility than the domestic markets in developed nations.

Factors to consider before you invest

  1. These ETFs are capable of offering very high returns when invested with a long-term horizon.
  2. Investing in emerging market ETFs can sometimes be risky, as emerging markets can see a steep fall at times.
  3. Emerging markets can sometimes be heavily influenced by global developments, thus, making them much volatile.