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Global ETFs to Diversify Emerging Market Risk


The economic and political problems in developing economies sent waves through the global markets. Nevertheless, the emerging markets should still be a part of a diversified global portfolio, and investors can utilize exchange traded funds to navigate the world.

For starters, investors can avoid troubled countries, like Argentina, Brazil, Indonesia, Turkey and South Africa, and turn to economies with more stable currencies, writes John Wasik for Reuters.

Currently, the so-called Fragile Five, or BIITS, – Brazil, India, Indonesia, Turkey and South Africa, stand out as widening current account deficits depress currencies, vulnerability to Fed tapering and political drama riles markets. [Broken BIITS: Rate Hikes Not Boosting Confidence in EM ETFs]

Instead, something like the iShares MSCI Frontier 100 ETF (FM) , which has a heavy allocation to frontier countries in Africa and the Middle East, has gained 18.2% over the past year and is up 1.4% year-to-date. [Diversify a Global Portfolio with a Middle East ETF]

ETF investors can find regional or country-specific ETFs that target stronger countries with more sold fundamentals, including the WisdomTree Middle East Dividend Fund (GULF) , iShares MSCI Mexico Capped ETF (EWW) , iShares MSCI South Korea Capped ETF (EWY) , iShares MSCI Taiwan ETF (EWT) and Market Vectors Vietnam ETF (VNM) .

Alternatively, the Vanguard Total Stock Market ETF (VTI) can provide investors with a broader global exposure, diversifying a portfolio with developed and emerging markets and including a mix of large companies with small weights toward developing countries in Africa, Asia and Latin America.

The volatility in the emerging markets may also be short-term in nature, and investor could let the swings run their course and just diminish his or her position to developing economies for now.

For more information on the developing economies, visit our emerging markets category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.