Brazil has been attracting investor attention for several years. It is an emerging market, but it has been producing stellar results for investors who are willing to take on some extra risk. Emerging markets carry extra risk because their economies can be unstable. (See also: The Risks Of Investing In Emerging Markets.)

One of the best ways to gain exposure to Brazil is through exchange-traded funds (ETFs​). Because these funds invest in a variety of stocks, you have more protection than you would if you bought a single stock.

Brazilian ETFs have been producing good returns well into 2017. We have chosen the top five based on year-to-date returns as of February 8, 2017.

Note that excellent returns to date are not an indication that the trend will continue throughout the year. However, since ETFs can be bought and sold like stocks, you can sell your shares if your investment doesn’t behave the way you want it to.

Though current returns are high for these ETFs, none of them have done well if you go back to their inception. This kind of track record suggests you should keep an eye on any investment in Brazilian ETFs. These may not be good candidates for an investor who uses a buy-and-hold strategy.

iShares MSCI Brazil Capped ETF (EWZ)

EWZ comprises the shares of large and medium-sized companies from Brazil. It uses the MSCI Brazil 25/50 Index as its underlying benchmark, investing a minimum of 95% of its assets in securities from that index. Featuring the shares of many of Brazil's largest companies, the fund ensures that no single component exceeds 25% of the underlying index weight.

The large-cap components of this fund make the returns more modest but more stable than some of the other ETFs featured below. In addition, the EWZ is among the most liquid ETFs traded anywhere. While the ETF is non-diversified, rules ensure that all components with an index weight greater than 5% of the fund do not cumulatively exceed 50% of the underlying index weight.

  • Avg. Volume: 16,883,027
  • Net Assets: $4.70 billion
  • Yield: 1.63%
  • YTD Return: 19.97%
  • Expense Ratio (net): 0.63%
  • Inception Date: July 10, 2000
  • Since Inception: +7.09%

VanEck Vectors Brazil Small-Cap ETF (BRF)

BRF focuses on small-cap stocks in Brazil. It uses the MVISä Brazil Small-Cap Index as its benchmark, investing a minimum of 80% of its assets in securities from that index. It may invest in micro-cap stocks. This means you must be willing to take on more risk. Of course, it also means you could have higher returns.

The year-to-date returns on this ETF have so far justified the risk. The fund and index count any company as Brazilian that receives at least 50% of its revenues in Brazil or has 50% of its assets in Brazil.

  • Avg. Volume: 44,376
  • Net Assets: $82.9 million
  • Yield: 4.20%
  • YTD Return: 60.06%
  • Expense Ratio (net): 0.59%
  • Inception Date: May 12, 2009
  • Since Inception: -0.88%

Direxion Daily Brazil Bull 3X ETF (BRZU)

BRZU is a leveraged ETF. It attempts to beat the MSCI Brazil 25/50 Index by 300%. Funds that attempt this kind of aggressive return take higher risks than finds that merely try to mimic an index’s performance.

BRZU focuses on large-cap and mid-cap stocks, but also invests in leveraged instruments. This means the fund may borrow money to buy stocks or other securities. This ETF is for the aggressive investor who wants to profit from Brazil.

  • Avg. Volume: 407,640
  • Net Assets: $70.38 million
  • Yield: 0.00%
  • YTD Return: 33.17%
  • Expense Ratio (net): 0.95%
  • Inception Date: April 10, 2013
  • Since Inception: -50.33%

ProShares Ultra MSCI Brazil Capped (UBR)

UBR is also a leveraged ETF, though it is not as aggressive as BRZU. UBR seeks two times the return of the MSCI Brazil 25/50 Index. This fund uses leveraged instruments. That means it may borrow money to buy securities. This approach makes UBR a high-risk investment. Couple that with the fact that Brazil is an emerging market, and this ETF is for those who like risk.

  • Avg. Volume: 11,583
  • Net Assets: $18.69 million
  • Yield: 0.00%
  • YTD Return: 21.68%
  • Expense Ratio (net): 0.95%
  • Inception Date: April 27, 2010
  • Since Inception: -24.77%

iShares MSCI Brazil Small-Cap (EWZS)

EWZS invests in companies that are in the bottom 14% of the Brazilian market based on capitalization. This ETF is for investors who like small-caps.

EWZS uses the MSCI Brazil Small Cap Index as its benchmark. The fund is not leveraged. While it invests at least 90% of assets in securities from the underlying index, it also invests in securities outside the index.

  • Avg. Volume: 59,438
  • Net Assets: $44.42 million
  • Yield: 3.04%
  • YTD Return: 19.05%
  • Expense Ratio (net): 0.63%
  • Inception Date: September 28, 2010
  • Since Inception: -10.40%

The Bottom Line

You must know your own risk tolerance before investing in Brazil. As evidenced by this list of ETFs, there are a variety of risk profiles for funds investing in Brazilian stocks. Make sure your risk tolerance matches the fund you choose if you are going to invest in Brazilian ETFs.

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