During the rally over the last couple of months, many investors have focused their attention on the the importance of emerging markets and the key role that these areas have toward a true global economic recovery. While the S&P 500 Index is the traditional benchmark, many professional investment advisors looking abroad for ideas that will help expand their portfolio mix. Let's take a look at the components of a top emerging market ETFs for some ideas that could be a good addition to a diversified portfolio. (For a quick refresher on emerging markets, read What Is An Emerging Market Economy? and Finding Fortune In Foreign-Stock ETFs.)
Around The World With Vanguard
The Vanguard Emerging Markets ETF (NYSE:VWO) is one of the best options an investor can choose, given its low 0.27% expense ratio. The VWO fund has a regional focus heavily concentrated the Asia ex-Japan market and Latin America, with over 50% of its assets divided between South Korea, Brazil, China, Taiwan and South Africa. Top holdings in the VWO fund include Hong Kong-based telecommunications provider China Mobile (NYSE:CHL), the Russia-based oil and gas services company Gazprom and Brazil's Oil & Gas giant Petroleo Brasileiro (NYSE:PBR).
China Mobile reported a 7.8% increase in operating revenue and a 6% increase in EBITDA for the period from January 1, 2010 to September 30, 2010. The increase in revenues was driven both by an increase in new subscribers from the rural market and expanded usage of value-added businesses like mobile video and mobile gaming.
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Oil & Gas Services
Led by higher domestic sales of and increased export prices, Petrobras increased net income in the first nine months by 27.9% to $13.3B compared to $10.4B in the same period a year ago. Adjusted EBITDA was U.S. $24.2 billion in the first nine months, compared to U.S. $20.8 billion on the same period of 2009.
Variety of ETFs
Emerging market ETFs, with a similar objective as the VWO fund, include the iShares MSCI Emerging Markets (NYSE:EEM), the SPDR S&P Emerging Markets (NYSE:GMM) and the PowerShares FTSERAFI Emerging Markets (NYSE:PXH).
The U.S. does not exist in a bubble and the same is true for investors who have the luxury of time on their hands to absorb the additional risks associated with investing in emerging markets. An investor's best approach involves building a diversified portfolio of investments, while including emerging market ETFs as a growth driver. (For further reading on this subject, see Re-Evaluating Emerging Markets.)