As a result, investors should consider making the emerging markets a strategic priority.
Top Mutual Funds for Emerging Markets
|Fund Name||Year-to-Date Return||Expense Ratio||Morningstar Rating|
|American Funds New World Class A (NEWFX)||-4%||1.03%||5-May|
|Fidelity Total Emerging Markets Fund (FTEMX)||-8%||1.40%||5-Apr|
|Vanguard Emerging Markets Index Fund (VEIEX)||-13%||0.33%||5-Mar|
Next, the Fidelity fund has performed poorly this year due to the sell-off in the Chinese equity markets. And it carries a slightly higher annual expense ratio than many in its peer group. It is highly concentrated in equities. Approximately 46% of the portfolio is concentrated in the financial services and information technology sectors. The fund is concentrated geographically as well, with 41% of its investments located in the Emerging Asia region of the world. Among its top 10 holdings are Taiwan Semiconductor, Samsung Electronics and Tencent Holdings.
Lastly, the Vanguard fund is an index of emerging-market investments. The best feature of Vanguard funds is their extremely low annual fees. An added benefit of this fund is that it pays a 3% dividend, which is a very rare yield among emerging markets-focused funds and could be extremely attractive for investors who appreciate receiving income from their mutual fund holdings. Among its top 10 holdings are China Construction Bank Corp., and China Mobile.
The Bottom Line
But there are other risks as well, such as geopolitical risk. In many parts of the world, social and political conditions can become unstable quickly. This can disrupt business conditions and upend the economic trajectory of a nation.
As a result, investing in international markets, and in particular the emerging markets, may carry higher risk than investing in developed economies like the United States. But for long-term investors, or those with higher risk tolerances, the emerging markets could reward patience. These mutual funds are some of the best options for investing in the emerging markets.
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