Ideas For Investing In Emerging Markets

By Investopedia Staff | May 29, 2012 AAA

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 play in ways to survive a market downturn. While the S&P 500 Index is the traditional benchmark, many professional investment advisors are 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.

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Around The World With Vanguard
The Vanguard Emerging Markets ETF (ARCA:VWO) is one of the best options an investor can choose, given its low 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).

SEE: Finding Fortune In Foreign-Stock ETFs

Communications
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.

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. 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 (ARCA:EEM), the SPDR S&P Emerging Markets (ARCA:GMM) and the PowerShares FTSERAFI Emerging Markets (ARCA:PXH).

SEE: Re-Evaluating Emerging Markets

The Bottom Line
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.

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