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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.

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