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December 28, 2010 at 04:34 AM
Even though emerging markets have been hot performers over the past year, typical mutual fund investors haven’t been getting their fair share of that sizzling performance.
That’s because according to Standard & Poor’s 2010 Scorecard of active funds versus indexes, a decisive 85.94 percent of all actively managed emerging market mutual funds have been handedly beaten by the S&P/IFCI Composite, a benchmark of emerging market stocks. Here’s the translation: If investors would’ve just bought an index fund or index ETF they would’ve done better!
Let’s evaluate four strategies for investing in emerging markets.
Broadly Diversified
An investment like the Vanguard Emerging Markets ETF (VWO) is one of the easiest ways to invest in fast growing economies around the world. VWO offers market exposure to mega developing countries like Brazil, China and Russia. The fund also charges annual fees of just 0.27 percent.
The main advantage of a broadly diversified emerging market ETF is it generally avoids single country or regional blowups that sometimes occur.
Regional Plays
Instead of trying to guess which individual countries within a certain region are going to outperform their peers, investing in the entire geographic area might make sense.
State Street Global Advisors has regional ETFs that follow emerging countries in Europe (GUR), Latin America (GML), Middle East and Africa (GAF) and Asia Pacific (GMF). All of the funds charge 0.60 percent annually.
Individual Countries
People willing to risk their money on the performance of stocks within a certain country have plenty of ETF choices.
