U.S. stocks' performance in recent years has led investors to forget about emerging markets ETFs despite the fact China has not so quietly become the second-largest economy in the world.
In 2020, the International Monetary Fund (IMF) believes China's economy will grow by 1% despite COVID-19, while the U.S. will see an 8% decline. In 2021, the IMF expects China's economy to grow by 8.2%. Emerging markets as a whole are projected to see 5.9% economic growth in 2021.
The beauty of emerging markets stocks is they often outperform during periods of U.S. underperformance, making emerging market ETFs a perfect complement to your plain-vanilla S&P 500 index fund.
According to Manulife Securities adviser Sonny Wadera, the last time U.S. stocks took emerging markets to the woodshed was the decade between 1990 and 1999, when U.S. stocks delivered an annual return of 20.38% – more than 700 basis points greater than emerging markets stocks.
However, in the next 10-year period between 2000 and 2009, U.S. stocks lost 33.75% on a cumulative basis while emerging markets stocks gained 89.22%.
In other words, sometimes it really does pay to diversify across the world.
Here are 10 of the best emerging markets ETFs to ride a global economic rebound. If you're like most American investors, you've probably got some home-country bias. These exchange-traded funds will ensure you don't miss out on the non-correlated performance of emerging markets.