Exposing Ourselves with This Emerging-Market ETF

Once in a while, we find ourselves exposed. And, regardless of whether we’ve done it on purpose or not, there is a level of vulnerability in exposure.

However, being vulnerable is not always a bad thing, as it opens us up to opportunities we may not have otherwise been given — and when opportunity arises, it is worth seizing. So, I say we expose ourselves to the iShares MSCI Emerging Markets Small-Cap Exchange-Traded Fund (NYSE: EEMS). EEMS is an emerging-market ETF, meaning it gives exposure to emerging-market economies in the form of small-cap stocks.

The fund holds a broad portfolio that attempts to avoid any heavy allocations toward any one region, country, sector or firm. As it is a small-cap fund, it does not have the concentration issues that many large-cap funds may have. Further, it is a fairly well-balanced fund as well, when looking from a sector-specific perspective.

Exposing ourselves to EEMS opens up the possibility for potentially better “pure plays” on local economies in emerging economies, as the fund is not dominated by large-cap stocks. Moreover, EEMS may also provide better exposure to sectors that are underrepresented in funds overwhelmed by large-cap stocks.

So, while its peers may offer exposure to the largest companies in the developing world, they may be impacted more significantly by broader macroeconomic trends versus changes in local consumption.

You have to pay to play when it comes to this ETF, seeing as it has an expense ratio of 0.70%. However, its price is fairly reasonable given the exposure it offers, which includes exposure to both Taiwan and South Korea, something many of its peers do not offer.

EEMS has net assets of $324.92 million and assets under management of $318.51 million. Though it has a higher expense ratio, it offers a dividend yield of 1.38%, and its last ex-dividend date was June 7.

As you can see from the chart below, the fund is trading in an immensely robust fashion. It opened at the highest end of its 52-week trading range, with an open price of $56.27, while its 52-week peak was $57.19.

Further, its 200-day moving average has stayed solid, with a bit of an uphill tilt. Though its 50-day moving average saw a bit of a dip in the early months of the year, it has managed to regroup and move higher — both of these are signs of a fund with strong momentum.

Source: Stockcharts.com

In summation, EEMS offers a broad portfolio — with exposure to potentially better “pure plays” in local economies of the developing world and sectors that are underrepresented in funds overwhelmed by large-cap stocks.

So, while exposing ourselves may open us up to vulnerability, it also can open us up to seize-worthy opportunities — as we see with this small-cap emerging-market fund.

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

Finally, since we have spoken about both exposure and opportunity, I will leave you with a quote from a woman who was open to, and seized, both: Helen Keller.

“Avoiding danger is no safer in the long run than outright exposure. The fearful are caught as often as the bold.”