Best Emerging Market ETFs

1. Vanguard FTSE Emerging Markets ETF (VWO)

VMO has had the largest ETF within the emerging market space over the past year. As well as holding more total assets under management than most, its dividend yield in 2022 was strong, and the annual charge is low at 0.08%. In fact, its low expense ratio and strong performance in recent years are the main reasons most people invest in VMO as a long-term holding.

What also makes this fund attractive for investors, particularly those who may be new to emerging markets, is that it’s balanced. It has exposure to developing economies across the emerging markets sector, and unlike some, it does not focus too heavily on China.

Finally, this fund uses the FTSE Emerging Index instead of the MSCI Index. The FTSE Index tracks the top 90% of stocks by market capitalisation and excludes the bottom 10%. In contrast, the MSCI Index tracks the top 85% and excludes the bottom 15%.

There is a strong weighting toward Chinese companies such as Tencent and Alibaba. However, its top ten holdings also include Reliance Industries Ltd. (India), Housing Development Finance Corporation Ltd. (India), and Vale Do Rio Doce (Brazil). The Vanguard FTSE Emerging Markets ETF share price during my research was $38.89, and its three-year return was 6.14%.

• Fund size: $97.2 billion
• Annual charge: 0.08%
• Dividend yield: 3.29% (2022)
• Who is this ETF best for? Investors who want a long-term holding in a large ETF with low annual fees and a strong dividend yield.

iShares Core MSCI Emerging Markets ETF (IEMG)

iShares MSCI Emerging Markets ETF (EEM) has long been among the top three largest funds in this sector, but in recent years, IEMG has become popular. IEMG launched in 2012 as a cheaper alternative to EEM. It’s long been seen as a low-cost ETF aimed at buy-and-hold investors.

IEMG has lower fees than EEM, and it has more diversification in the sense that its portfolio includes smaller-cap companies that its older brother ignores. As a general sentiment, investors lean more towards IEMG as a long-term holding, while active traders prefer EEM.

Another notable fact is that IEMG follows the MSCI Emerging Markets Index. This means it classifies South Korea as an emerging market. In contrast, ETFs such as VWO and SCHE track indices that classify South Korea as a developed market. Therefore, if you want exposure to South Korea as an emerging market, this ETF might be best.

The iShares Core MSCI Emerging Markets ETF share price during my research was $48.41 Its top ten holdings include some of the biggest companies in China, including Taiwan Semiconductor Manufacturing Co., Ltd., Tencent, and Alibaba. My research found its three-year return was 5.79%.

• Fund size: $69.47 billion
• Annual charge: 0.09%
• Dividend yield: 2.12% (2022)
• Who is this ETF best for? Investors who want an ETF with a large total amount of assets and that counts South Korea as an emerging market.

3. SPDR Portfolio Emerging Markets ETF (SPEM)

This fund has over 1,000 assets under management, which makes it an extremely well-diversified ETF. Its top ten holdings are companies from China and, moreover, Asia as a whole, including Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, and Alibaba Group Holding Ltd.

Additionally, its emerging market equities cover a variety of sectors, including financial services, information technology, consumer cyclicals, and communication services. What’s more, this ETF is fairly cheap.

During my research, the SPDR Portfolio Emerging Markets ETF (SPEM) share price was $33.88. Its return over the six months to May 2023 was 14.74%. Over three years, this fund returned 5.95% to investors, but the five-year return was lower at 0.30%.

• Fund size: $6.9 billion
• Annual charge: 0.11%
• Dividend yield: 2.70% (2022)
• Who is this ETF best for? This ETF might be best suited to investors who want a diversified fund with a strong focus on Asian markets and solid dividend yields.

4. Schwab Emerging Markets Equity ETF (SCHE)

The Schwab Emerging Markets Equity ETF is similar to VWO in that it has hundreds of stocks spread across dozens of countries. It does lean heavily on the financial services and energy sectors, with Tencent Holdings Ltd. and Alibaba Group Holding Ltd. (both based in China) being among its top holdings.

However, SCHE does also have a large stake in Reliance Industries Ltd., which gives this ETF exposure to India. The share price for the Schwab Emerging Markets Equity ETF during my research was $24.17.

I discovered it had a six-month return of 15.24% but one-year returns of -5.90%. Over three years, however, this fund returned 5.15% to investors. Its expense ratio is fairly low for an ETF of this kind.

• Fund size: $8.5 billion
• Annual charge: 0.11%
• Dividend yield: 2.30% (2022)
• Who is this ETF best for? Investors who want an emerging markets ETF that focuses on large cap stocks in China and India with a low expense ratio.

5. KraneShares S&P Pan Asia Dividend Aristocrats Index ETF (KDIV)

This emerging market ETF might be best for investors and traders who want maximum exposure to Asia. KraneShares S&P Pan Asia Dividend Aristocrats Index ETF has a particular focus on China and assets that offer high dividends. Brendan Ahern, chief investment officer at KraneShares, noted that because China has the second-largest economy in the world, it stands out among emerging markets.

KDIV is designed to offer exposure to businesses in China, Japan, and other Asian countries that have increased their dividends over a sustained period. Although increased dividends aren’t always a sign of success, they can be used as a performance marker.

My research showed that the KraneShares S&P Pan Asia Dividend Aristocrats Index ETF share price was $27.04. It’s a fairly new fund that launched in 2022, so long-term returns aren’t available. However, six-month data says it returned 26.62%. The one other thing to note is that this ETF has a 0.69% expense ratio.

• Fund size: $2.69 million
• Annual charge: 0.69%
• Dividend yield: 0.82% (2022)
• Who is this ETF best for? Investors who want an ETF that focuses on the highest-paying dividend stocks in Asia.