A Less Volatile Way to Invest in Emerging Markets
A smoother ride is possible.
Emerging-markets stocks carry more risk than their developed-markets counterparts. Political instability, poor corporate governance, and immature regulatory and legal systems can lead to volatility that may be difficult to stomach. A low-volatility strategy like iShares Edge MSCI Min Vol Emerging Markets ETF (EEMV) can take some of the edge off and should provide solid risk-adjusted performance over the long run. Its integrated approach to reducing volatility, well-diversified portfolio, and low fee earn the fund a Morningstar Analyst Rating of Silver.
The fund tracks the MSCI Emerging Markets Minimum Volatility Index. It uses an optimizer to select and weight stocks from the MSCI Emerging Markets Index in a way that minimizes expected volatility. This algorithm looks for companies with relatively low expected volatility while also considering how stocks behave relative to one another. Therefore, it can overweight volatile stocks if their low correlations are expected to reduce the portfolio's overall volatility.
Daniel Sotiroff does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.