Vanguard ETF: | 7.4%* | ||
Diversified Core: | 8.1%* | ||
Six Core Asset ETFs: | 7.3%* |
Articles on PIE
- Emerging Markets Help Diversification, Risk and Returns
04/21/2011
The volatility in stocks of developed nations during recession encourages diversification. Today investors are diversifying their portfolio by investing in multiple portfolios nationally, regionally, industrially and sectors.
One area for diversification is emerging markets which give us the possibilities of strong returns and a market that behaves differently than developed nations’ equities.
Tighter monetary policies implemented by China and India, with their fast growing economies, helped drive global growth over the past few years. We believe that the emerging market returns may prove less vigorous after two year impressive gains.
However governments of these nations have taken measures to overcome inflation by increasing interest rates and they are supported by moderate consumer growth. Emerging market stocks show a reasonable gain on the whole, particularly in solid corporate earnings and growth prospects.
Today emerging market specialists look at:
- Technology with demands for new products
- Telecommunications that offer dividend and earnings growth
- Consumer companies that saw sharp share price run-ups last year
They shy away from
- Financial stocks in a higher interest rate environment because of the monetary policy
- Companies that face increased competition from large multinational corporations.
The table shows the major emerging market diversified ETFs
Description
Symbol
1 Yr
3 Yr
5 Yr
Avg. Volume(K)
1 Yr Sharpe
WisdomTree Emerging Markets Equity Income
19.2%
9.22%
NA
234
84.76%
PowerShares DWA Em Mkts Technical Leaders
17.36%
-4.93%
NA
355
75.05%
Vanguard MSCI Emerging Markets
15.65%
2.76%
10.11%
22,113
74.53%
PoweShares FTSE RAFI Emerging Markets
12.87%
4.33%
NA
123
66.99%
Schwab Emerging Markets
14.1%
NA
NA
222
65.93%
iShares MSCI Emerging Markets
13.21%
2.88%
9.27%
69,534
59.85%
The overall returns from the emerging market ETF’s are robust with many new ETF’s becoming available. The robust profits induced new ETF’s which have a significant history.
In terms of five years returns VWO & EEM are the best with returns of 9.27% & 10.11% well above the five year benchmark interest rates. The volumes are also large indicating high levels of liquidity. In term of 1 year returns VWO & EEM again are top with returns of 15.65% & 13.21%.
It is important to consider risk factors: Investing in Emerging markets can be subject to currency risk in exchange rate and restrictions on the movement of foreign currency. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.
In addition, there may be less governmental supervision and regulations and political instability.
Despite this, emerging market equities from an important part of a portfolio. Regional diversification provides a hedge against volatility in the USA and other developed markets. This helps with our objective to maximize returns on portfolio while minimizing risk.
Symbols: DEM, VWO, PXH, PIE, SCHE, EEM
Disclaimer:
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
- Emerging Markets Demand Diversification
04/13/2011
Diversification is the theme that has emerged since. August 2008. Today investors are diversifying in multiple dimensions: nationally, regionally, industrially and from a sector perspective.
Emerging markets offer the possibility of good returns but there is some risk. Inflationary pressures and the impact of tighter monetary policies in China and India, with their fast growing economies, helped drive global growth over the past few years. The sharp capital inflows that buoyed emerging markets assets in 2010 could also reverse if economies experience a sudden slowdown.
Emerging market returns may prove less robust in the coming months after two years of impressive gains. However emerging markets governments that have enough flexibility to effectively manage inflation are likely to continue expanding at healthy rates, supported by moderate consumer growth. Emerging markets stock valuations also appear to be reasonable on the whole, particularly in light of solid corporate earnings and growth prospects, and managers believe there are myriad investment opportunities.
Portfolio managers and analysts favour technology that is likely to profit from demand for new products as well as telecommunications providers that offer dividends and earnings growth. Consumer companies remain an area of considerable interest, as stocks witnessed sharp share price run-ups last year.
The same group has become more cautious about some financial stocks in a higher interest rate environment and amid the prospect of tighter regulations for banks. They are also cautious about those that face increased competition from larger multinational corporations.
Please find below the table of major emerging market diversified ETFs
Description
Symbol
1 Yr
3 Yr
5 Yr
Avg. Volume(K)
1 Yr Sharpe
WisdomTree Emerging Markets Equity Income
21.48%
10.04%
NA
237
94.8%
Vanguard MSCI Emerging Markets
18.24%
3.63%
10.34%
22,047
86.76%
PoweShares FTSE RAFI Emerging Markets
16.61%
4.99%
NA
133
85.96%
PowerShares DWA Em Mkts Technical Leaders
19.1%
-5.04%
NA
362
82.45%
Schwab Emerging Markets
17.1%
NA
NA
220
79.96%
iShares MSCI Emerging Markets
15.01%
2.94%
9.46%
69,576
68.53%
In terms five years returns VWO & EEM are the best with returns of 10.34% & 9.46% well above the five year benchmark interest rates. The volumes are also large indicating high levels of liquidity. In term of 1 year returns DEM again VWO are top with returns of 21.48% & 18.24%.
VWO employs an indexing approach to provide broad exposure to the equity markets of emerging countries mainly Europe, Asia, Africa and Latin America. The median market capitalization is of $ 18 billion. The expense ratio is 0.22% as of 25/02/2011. Please find attached the top ten largest holding as on 28/02/2011. (These holding comprise of 19% of the net assets of the fund.)
1. Petroleo Brasileiro SA
2. Vale SA
3. Samsung Electronics Co Ltd.
4. Gazprom OAO
5. Taiwan Semiconductor Manufacturing Co Ltd.
6. China Mobile Ltd
7. America Movil SAB de CV
8. Itau Unibanco Holding SA
9. Industrial & Commercial Bank of China
10. China Construction Bank Corp
Diversification is always a good strategy but before diversifying we have to consider the risk factors. Investing in Emerging markets can be subject to currency risk in exchange rate and restrictions on the movement of foreign currency. In addition, there may be less governmental supervision and regulations and political instability.
Despite this, emerging market equities from an important part of a portfolio. Regional diversification provides a hedge against volatility in the USA and other developed markets. This helps with our objective to maximise returns on portfolio while minimizing risk.
Disclaimer:
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
Symbols: DEM, VWO, PXH, PIE, SCHE, EEM
(NYSE: DEM), (NYSE: VWO), (NYSE: PXH), (NYSE: PIE), (NYSE: SCHE), (NYSE: EEM)