Exchange Traded Funds (ETFs)

ETF Talk: This Fund is the ‘Core’ of Emerging Market ETFs

The iShares Core MSCI Emerging Markets ETF (IEMG) tracks a market-cap-weighted index of emerging market firms that cover 99% of market capitalization.

The fund seeks investment results that correspond to the price and yield performance of the MSCI Emerging Markets Investable Market Index. The underlying index is designed to measure large-, mid- and small-cap equity market performance in global emerging markets.

IEMG offers outstanding coverage of emerging markets in a low-priced and highly liquid package. As part of the line of “Core” exchange-traded funds (ETFs) from BlackRock, it offers very similar, but more comprehensive exposure than its sister fund EEM, another emerging markets ETF. IEMG includes smaller firms in its portfolio than EEM. IEMG is also far cheaper to hold than EEM shares. Since the fund’s 2012 launch, IEMG has attained a huge asset base and very deep liquidity.

The top IEMG sectors include financial services, technology, consumer cyclical, basic materials and energy. Among the fund’s top five holdings, 20.26% are in Tencent Holdings Ltd. (OTCMKTS: TCEHY), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM), Alibaba Group Holding Ltd. (NYSE: BABA), Samsung Electronics Co. Ltd. (OTCMKTS: SSNLF) and Naspers Limited Class N (OTCMKTS: NPSNY).

A regional review shows that IEMG’s top holdings are 74.11% in Asia, 11.36% in Latin America, 7.7% in the Middle East and Africa and 6.18% in Europe. Within Asia, the fund’s holdings are 21.91% in Hong Kong, 14.52% in South Korea, 12.19% in Taiwan and 9.61% in India.

The ETF currently has $49.95 billion in net assets and an average 0.02% spread, which is the difference between the bid and asking prices of a security. It has an expense ratio of 0.14%, so it is relatively cheap to hold in comparison to other exchange-traded funds.

To sum up, long-term investors who are looking for cheap, liquid and comprehensive exposure to emerging markets should consider this fund. It is also a good way to add international diversity to a portfolio. As always, investors should exercise their due diligence in deciding whether or not IEMG is a worthwhile investment, based on their personal needs.

I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.