Exchange Traded Funds (ETFs)

Invest in Emerging Markets and High Yields

The iShares J.P. Morgan USD Emerging Markets Bond ETF (NASDAQ: EMB) seeks to track an index of U.S. dollar-denominated, sovereign debt issued by emerging-market countries.

EMB, one of the first emerging-market debt exchange-traded funds (ETFs) to be launched, tends to own strong assets and offer consistent liquidity. It is like many peer funds, but EMB is U.S.-dollar-denominated rather using local-currency debt. This eliminates direct currency risk for U.S. investors but increases credit risk that a strengthening dollar or weakening local currency could make the debt harder to service.

Each issuer must have at least $1 billion outstanding, and bonds need a minimum of two years remaining to maturity. The fund typically favors longer maturities and tends to lean toward riskier paper, both of which increase yield. One of EMB’s strongest selling points is its strong liquidity, enhancing its appeal for traders.

Source: www.stockcharts.com

EMB has $15 billion in assets under management and a 0.01% average spread. It has 614 holdings and an expense ratio of 0.39%, meaning it is relatively inexpensive to hold in relation to other exchange-traded funds.

The fund will invest at least 80% of its assets in the component securities of the underlying index and will invest at least 90% of its assets in fixed income securities of the types included in the underlying index. The index is a broad, diverse U.S.-dollar-denominated emerging markets debt benchmark that tracks the total return of actively traded, external debt instruments in emerging market countries.

iShares J.P. Morgan USD Emerging Markets Bond ETF (NASDAQ: EMB) provides exposure to U.S. dollar-denominated government bonds issued by emerging market countries, access to the sovereign debt of 30+ emerging market countries in a single fund, a potentially superior yield to its peers and emerging markets allocation.

Exclusive ETF Talk: Being Prepared for Anything with an Insurance ETF

However, as with any opportunity, potential investors should conduct their own due diligence in deciding whether or not this fund fits their own individual investing needs and portfolio goals.

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.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.