Exchange Traded Funds (ETFs)

Huge Emerging Markets Fund Offers Diversification

Our coverage of broad-based emerging markets exchange-traded funds (ETFs) today will feature another huge U.S.-based emerging markets fund, iShares MSCI Emerging Markets Index (NYSE: EEM), with a whopping $30.6 billion in net assets.

A “broad-based” emerging markets ETF is one with investments not concentrated in a specific region. The fund seeks to track the investment of the MSCI Emerging Markets Index, which is composed of large- and mid-capitalization emerging market equities.

With money in more than 800 emerging-markets stocks, it is an understatement to say EEM’s portfolio is well diversified. The holding with the highest weight in the portfolio only makes up 3.77% of the fund’s investments, and all except nine holdings in the portfolio have weightings of less than 1%. This means is that two or three underperformers likely will have scant impact on the fund’s overall performance.

EEM has had a terrific year in 2016, with a total cash inflow of more than $6.7 billion, a number exceeded by only four other ETFs in the world. Its year-to-date return is 13.17%, beating the S&P 500’s 4.66% return by a large margin. The graph below indicates a clear rise in the price of the fund in 2016, starting at $28 at the beginning of the year to its current price of around $37, a tremendous increase of 32%.

View the current price, volume, performance and top 10 holdings of EEM at ETFU.com.

The fund has a dividend yield of 1.67% and an expense ratio of 0.69%. EEM’s top five holdings are Tencent Holdings Ltd, 3.77%; Samsung Electronics Co Ltd, 3.40%; Taiwan Semiconductor Manufacturing Co Ltd, 3.39%; Alibaba Group Holding Ltd ADR, 2.80%; and China Mobile Ltd, 1.89%. EEM typically holds onto most of its investments for the long term.

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If you are interested in gaining exposure to large and mid-sized companies in emerging markets and simple access to over 800 emerging market stocks, consider iShares MSCI Emerging Markets Index (EEM).

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Doug Fabian

Doug Fabian is the Editor of Weekly ETF Report, a free weekly e-newsletter, and the newsletter Successful ETF Investing. He’s also the host of the syndicated radio show, “Doug Fabian’s Wealth Strategies.” Doug also edits the fast-paced trading service ETF Trader’s Edge, for investors who want to take their profits to the next level. Taking over the reins from his dad, Dick Fabian, back in 1992, Doug has continued to uphold the reputation of the newsletter as the #1 risk-adjusted market timer as ranked by Hulbert’s Investment Digest. Doug became a member of the “SmartMoney 30” in 1999 — a listing of the most influential individuals in the mutual fund industry. In the feature, SmartMoney magazine exclaims that Doug is the best-known “trend follower” among the $56 billion (and growing) group of financial advisors. In 2001, Doug wrote “Maverick Investing,” published by McGraw-Hill. He also regularly appears at seminars around the country, stands out on the pages of the largest newspapers (The Wall Street Journal, The Los Angeles Times, and The New York Times), and speaks on national television (CNBC, Fox News, and Bloomberg Forum). For more than 35 years, Successful ETF Investing (formerly the Telephone Switch Newsletter and Successful Investing) has produced double-digit percentage annual gains. Doug has become known for his expert knowledge and timely use of innovative tools, such as exchange-traded funds, bear funds, and enhanced-index funds to profit in any market climate. For more information about Doug’s services, go to http://www.fabian.com/