Emerging markets, often characterized by rapid economic growth, are countries transitioning from developing to developed economies. These nations typically have lower per-capita incomes than developed countries but offer economic potential.
BRICS is an acronym for some of the top emerging market countries — Brazil, Russia, India, China and South Africa — but other nations are very much in play as well, such as Mexico, Indonesia, South Korea, Turkey and Taiwan.
With their rapid industrialization and expanding middle class, emerging markets have become an avenue for global investors seeking higher returns. Exchange-traded funds (ETFs) are a popular way to access this potential.
What is an emerging market ETF?
An emerging market ETF is a type of investment vehicle that tracks the performance of a basket of stocks from developing countries. ETFs are traded on stock exchanges, similar to individual stocks, but they offer a more diversified approach to investing.
Benefits of investing in emerging market ETFs include:
- Diversification: ETFs provide instant diversification across a wide range of emerging market stocks, reducing the risk associated with investing in a single company or country.
- Exposure to growth opportunities: Emerging markets are home to rapidly expanding companies and industries, providing potential opportunities to participate in their growth.
Emerging market countries often enjoy rapid GDP growth but that doesn’t always translate into faster stock gains. Many emerging market ETFs — including several on this list — have fallen short of the S&P 500’s performance over the last five years, due to a variety of factors including political instability, economic fluctuations and currency volatility.
7 best emerging market ETFs
If you’re looking to invest in emerging markets but don’t know much about international investing or simply don’t want to hand-pick individual stocks, an emerging market ETF can be a convenient starting point.
Bankrate selected these top-performing funds based on the following criteria:
- U.S. funds that appear in ETF.com’s screener for emerging markets
- Funds among the top performers over the last five years
- Performance measured on Sept. 26, 2024, using the most recent figures
- No inverse or leveraged ETFs
iShares MSCI Emerging Markets Small-Cap ETF (EEMS)
This ETF from iShares tracks the investment results of an index composed of small public companies in emerging market countries. Top countries in the fund include India, Taiwan and South Korea. Its top three sectors are industrials, information technology and consumer discretionary.
- 2024 YTD performance: 11.4%
- Historical performance (annual over 5 years): 11.1%
- Expense ratio: 0.7%
Freedom 100 Emerging Markets ETF (FRDM)
This ETF seeks to track the total return performance of the Life + Liberty Freedom 100 Emerging Markets index. According to the fund manager, the index invests in companies located in countries with higher personal and economic freedom scores. Taiwan, Chile and South Korea are among the countries with the heaviest weightings.
- 2024 YTD performance: 14.8%
- Historical performance (annual over 5 years): 10.2%
- Expense ratio: 0.49%
Cambria Emerging Shareholder Yield ETF (EYLD)
This actively managed ETF tracks companies in emerging market countries that are returning cash to shareholders through dividends, buybacks and net debt reduction. As of Aug. 1, 2024, the fund had significant investment exposure to companies in the information technology, financials and energy sectors. Top-weighted countries include Taiwan, China and South Korea.
- 2024 YTD performance: 16.2%
- Historical performance (annual over 5 years): 9.1%
- Expense ratio: 0.63%
Kraneshares MSCI Emerging Markets ex China ETF (KEMX)
This fund is benchmarked to the MSCI Emerging Markets ex China index, which tracks large- and mid-cap companies in emerging market nations, excluding China.
- 2024 YTD performance: 12.9%
- Historical performance (annual over 5 years): 9%
- Expense ratio: 0.24%
SPDR S&P Emerging Market Dividend ETF (EDIV)
The fund tracks the performance of the S&P® Emerging Markets Dividend Opportunities index. The fund gives exposure to 100 emerging market stocks that pass stability screens and offer the highest risk-adjusted dividend yield. The index is weighted based on the stocks’ trailing-12-month dividend yields. Finally, no single country or sector can make up more than 25 percent of the fund, and no stock can have a position size in excess of 3 percent.
- 2024 YTD performance: 21.9%
- Historical performance (annual over 5 years): 8.5%
- Expense ratio:…
Read More: 7 Best Emerging Market ETFs: Top Performers In 2024