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DEFINITION of 'Emerging Market ETF'

An exchange-traded fund that focuses on the stocks of emerging market economies, such as Latin America, Asia and Eastern Europe. The underling indexes tracked by emerging market ETFs vary from one fund manager to another, but all should be passively managed and contain equities from multiple countries, unless otherwise stated.

Within the broad class of emerging market ETFs, there are fund members that focus on certain market-capitalization ranges, high-dividend stocks, or funds with high allocations towards specific sectors.

BREAKING DOWN 'Emerging Market ETF'

Emerging market securities are finding their way into more and more portfolios; many investors (especially those with longer time horizons) simply cannot afford to miss out on the higher returns offered by many emerging market economies. These nations are typically identified by high growth rates in areas like natural production, and many have surpluses of rich natural resources that are heavily consumed by the entire world.

Expense ratios for emerging market ETFs may be slightly higher than the average for domestic-focused funds. Trading costs tend to be higher when investing directly in local stock exchanges in emerging market nations.

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