WisdomTree Emerging Market Small Cap ETF Enables Diversification
06/16/2011 0 comments
Emerging market stocks have been recognized as an important asset class for diversification purpose for a long term retirement investing portfolio. Small company stocks in emerging economies offer even higher growth in this asset class. The small cap shares are usually those which have relatively small market capitalization usually ranging between $ 300 million to $ 2 billion.
It is thus important to study these ETFs more carefully before investing. In this article, we present more detailed study on WisdomTree Emerging Market ETF (DGS).
The following table lists three most liquid small cap ETFs in this asset class.
Emerging Market Small Cap
06/10/2011
| Description | Symbol | 1 Yr | 3 Yr | 5 Yr | Avg. Volume(K) | 1 Yr Sharpe |
|---|---|---|---|---|---|---|
| SPDR S&P Emerging Markets Small | EWX | 18.27% | 3.74% | NA | 119 | 104.22% |
| Wisdomtree Emerging Mkts Small | DGS | 33.94% | 11.31% | NA | 129 | 166.6% |
| Guggenheim Frontier Markets | FRN | 19.43% | NA | NA | 72 | 108.31% |
For information on more ETF performance, please refer to here.
From the above table clearly DGS is leading the other in terms of longevity and in terms of returns of one year. Compared with broad base emerging market index ETF (DGS), its three year annualized return 11.31% is way above the EEM's annualized return (about 0%). The inception date of the fund is 8/1/2007. 64% of the fund iin small cap shares.
DGS has also a unique diversification in the emerging market. Please see the following table for its holding percentages among countries as of 6/06/2011.
|
1. Taiwan |
20.97% |
|
2. South Korea |
11.24% |
|
3. South Africa |
9.65% |
|
4. Thailand |
9.61% |
|
5. Brazil |
8.95% |
|
6. Israel |
7.21% |
|
7. Turkey |
6.88% |
|
8. Malaysia |
5.31% |
|
9. China |
5.00% |
|
10. Chile |
4.17% |
|
11. Philippines |
3.18% |
|
12. Indonesia |
2.34% |
|
13. Mexico |
2.25% |
|
14. India |
1.25% |
|
15. Poland |
0.52% |
|
16. Argentina |
0.33% |
|
17. United States |
0.15% |
Please also find below the sector wise diversification of DGS as on 06-06-2011.
|
Sector |
Weight |
|
1. Industrials |
21.40% |
|
2. Financials |
18.47% |
|
3. Consumer Discretionary |
16.38% |
|
4. Information Technology |
11.54% |
|
5. Materials |
10.19% |
|
6. Consumer Staples |
7.71% |
|
7. Utilities |
6.67% |
|
8. Health Care |
2.95% |
|
9. Energy |
2.38% |
|
10. Other |
2.08% |
One of the biggest advantages of investing in small-cap stocks is to exploit market inefficiency: the opportunity to beat institutional investors.Many small cap companies are not well researched. This is more true for emerging market small companies. Since DGS offers a systematic way to invest in a broad basket of small compaines in these regions, it is an effective to gain exposure in this important asset class and derive higher returns.
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: EEM, DGS, FRN, EWX, VWO, ETFs, Asset Allocation
Exchange Tickers: (EEM), (DGS), (FRN), (EWX), (VWO)
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