Emerging Markets for the small guy
While the S&P 500 returned a paltry 4.5% in 2005 the emerging markets were on a tear, Brazil, China, India, Mexico and South Korea returned stellar returns of 20-50% in 2005. And if January is any indication 2006 promises to be another block buster year for these economies that have been growing at 8-9% per year. These markets will prosper for the next 2-3 decades
- Emerging markets have a large consumer middle class that wants to join the global economy
- Emerging economies have cheap labor, that makes them attractive destinations for global companies to set up manufacturing and service industries
- ETF's charge 0.6-0.7% in fees
- Emerging markets ETF's have been well structured to give appropriate diversification
- ETF's are traded like stocks
- EEM ($98.14) - a must own the grand dady of emerging markets has exposure to most emerging markets (South Korea 17%, South Africa 12%, Brazil 11%, Taiwan 11%, China 8%, Mexico 8%, India 5%, Russia 5% etc)
- FXI ($ 70.11) - an exclusively China ETF, a must own if you want to participate in what will become the worlds largest economy.
- ILF ($140.48) - Latin America ETF (Brazil 51%, Mexico 36%, Chile 10%, others)
I recommend that every small investor invest a minimum of 10-15% of their portfolio's in the emerging economies and the best way is probably thru EEM and FXI, an allocation of 10% in EEM and 5% in FXI can supercharge your portfolio.
For more information of these any other ETF's in general:
2 Comments:
The Vanguard Emerging Markets VIPERs (Symbol: VWO) covers the same market as EEM and has substantially lower expense ratio. (VWO: 0.30%, EEM 0.75%)
just want to add:
I am not in any way affiliated with or sponsored by Vanguard.
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