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ETF Specialist

This ETF Offers Low-Cost Exposure to Developing Economies

Capturing the evolving composition of the emerging-markets universe.

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The emerging-markets universe is more dynamic than developed markets like the United States. The country and sector composition of these markets change at a much greater pace as their underlying economies grow and develop. But gaining access to that growth comes at a cost, as these stocks are also more difficult and expensive to trade than those listed in developed economies. Thus, a low-cost index fund like  iShares Core MSCI Emerging Markets ETF (IEMG) can be a great option. Its market-cap-weighted approach cuts back on turnover and related trading costs while capturing the evolving composition of these markets. It earns a Morningstar Analyst Rating of Bronze.

IEMG tracks the MSCI Emerging Markets Investable Market Index, which includes stocks of all sizes from 24 emerging-markets countries. Its market-cap-weighted approach benefits investors by capturing the market’s collective opinion of each stock’s value while mitigating turnover and trading costs. Markets usually get long-term prices correct, but they occasionally make mistakes. Investors can drive valuations up if they get excited about a particular area of the market, and market-cap weighting will increase the fund’s exposure to it.

Daniel Sotiroff does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.