The best performing emerging markets ETF is an exchange-traded fund that tracks developing economies and consistently outperforms peers. These funds provide diversified exposure to regions like Asia, Latin America, and Africa.
Emerging markets ETFs pool investor money to buy stocks across multiple countries. They replicate indexes like the MSCI Emerging Markets Index or FTSE Emerging Markets All Cap China A Inclusion. Top performers use strategies to minimize costs while maximizing returns.
| Type | Strategy | Example |
|---|---|---|
| Broad Market | Tracks entire emerging markets | iShares Core MSCI Emerging Markets ETF (IEMG) |
| Single-Country | Focuses on one country | iShares MSCI China ETF (MCHI) |
| Sector-Specific | Targets industries within EM | Global X MSCI China Energy ETF (CHIE) |
Investors evaluate performance using metrics like expense ratio, dividend yield, and tracking error. The best performers maintain low fees (below 0.50%) and tight tracking error (below 0.20%). For example, IEMG has a 0.11% expense ratio and 0.06% tracking error.
Many investors confuse emerging markets with frontier markets. Emerging markets include large economies like China and India, while frontier markets focus on smaller, less-developed nations. The MSCI Emerging Markets Index covers 24 countries, while the Frontier Markets Index includes 31.
During the 2020 market downturn, IEMG fell 31.3% but recovered 82.4% by year-end. Its broad diversification across 2,700 stocks in 27 countries helped mitigate losses. Compare this to single-country ETFs like MCHI, which dropped 23.2% but rebounded 68.1%.
I manage a portfolio that includes both IEMG and MCHI. During volatile periods, IEMG's diversification provides stability while MCHI offers higher growth potential during recoveries.