Emerging market equity ETFs offer an attractive category for growth investors or investors seeking to expand their investment horizons with the addition of international investments. The category is one of three geographical groupings that divides the investment universe with emerging equities reporting higher risks and potential returns than the developed markets but generally lower risks in comparison to the frontier markets.

Emerging market equity investing is often characterized by passive indexes such as the MSCI Emerging Markets Index and the S&P Emerging Markets Broad Market Index which are utilized by fund companies for index replication funds providing broad market exposure. However, with 24 countries this category creates a broad universe for investors and each country offers its own advantages.

For investors seeking to add emerging markets to their portfolio, ETFs can be a great alternative to individual stock picking or even passive market investing. Below we provide five of the top funds for investors seeking exposure to the best investments that the category has to offer. Funds were chosen based on strategy, assets under management and performance. All data is as of December 27, 2017.

Direxion Daily Emerging Markets Bull 3X Shares (EDC)

Issuer: Direxion

Assets under management: $300.3 million

YTD performance: 129.06%

Expense ratio: 1.15%

Price: $121.13

Direxion is a market leader in leveraged ETFs and EDC provides an option for investors seeking emerging market exposure. EDC takes the bullish position on emerging markets allowing investors to achieve three times the return of the underlying securities with leverage. Investors should keep in mind that leveraged investing can add additional risks. This fund also seeks daily returns which may be optimal for short term traders and only promises three times the returns of the underlying securities per day.

The Fund seeks three times the performance of the MSCI Emerging Markets Index. Therefore, it uses an index replication strategy along with the leveraged investing to achieve the targeted results. In 2017 the fund has a year-to-date (YTD) return of 129.06%. Direxion invests in the iShares MSCI Emerging Markets ETF to achieve direct exposure to the Index. It also holds iShares MSCI Emerging Markets ETF swaps and cash instruments.

iShares MSCI BRIC ETF (BKF)

Issuer: iShares

Assets under management: $302.2 million

YTD performance: 41.47%

Expense ratio: 0.72%

Price: $44.24

The iShares MSCI BRIC ETF is a fund that offers exposure to a unique subset of the emerging markets, the BRICs. BRIC countries include Brazil, Russia, India and China. These funds are known to be four of the most sophisticated and rapidly advancing economies in the emerging markets category.

In 2017 this fund returned 41.47%. One-year and three-year annualized total performance for the Fund is 44.99% and 10.35% respectively.

iShares Edge MSCI Multifactor Emerging Markets ETF (EMGF)

Issuer: iShares

Assets under management: $106.2 million

YTD performance: 39.49%

Expense ratio: 0.45%

Price: $48.59

EMGF is a tracker fund that utilizes a customized index for investing. The MSCI Emerging Markets Diversified Multi-Factor Index is reconstituted annually and screens emerging market companies in the MSCI Emerging Markets Index for four specific factors: value, momentum, quality and size. It includes 162 stocks compared to the 837 in the broad Emerging Markets Index. Top holdings in the Fund include Geely Automobile, Tencent, AAC Technologies, Netease, Hana and Samsung.

The Fund was launched in December 2015. In 2017 it has a YTD return of 39.49%.

First Trust Emerging Markets AlphaDEX Fund (FEM)

Issuer: First Trust

Assets under management: $438.7 million

YTD performance: 38.61%

Expense ratio: 0.80%

Price: $27.54

FEM is a customized index fund offering from First Trust which is part of its AlphaDEX series. The AlphaDEX Indexes are administered by Nasdaq and utilize an enhanced stock selection methodology. In this case the Index screens stocks from the NASDAQ Emerging Markets Index for growth and value factors. Growth factors include 3-, 6- and 12- month price appreciation, sales to price and one-year sales growth. Value factors include book value to price, cash flow to price and return on assets. Stocks are chosen and weighted based on a combination of both the growth and value rankings.

In 2017, this fund returned 38.61%. The Fund was launched in April 2011. Its one-year and three-year annualized total returns are 41.77% and 11.16% respectively.

iShares MSCI Emerging Markets ETF (EEM)

Issuer: iShares

Assets under management: $38.5 billion

YTD performance: 35.33%

Expense ratio: 0.72%

Price: $46.96

EEM offers investors comprehensive broad market exposure to all of the emerging markets in an index fund that seeks to track the MSCI Emerging Markets Index. The Index includes large-cap and mid-cap stocks with 837 holdings across the 24 emerging market countries. China accounts for the greatest proportion of the Fund’s market value at 30% followed by South Korea at 16%.

In 2017 this fund returned 35.33%. The Fund was launched in April 2003. Its one-year and three-year annualized total returns are 38.24% and 7.83% respectively.                           

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