iShares MSCI Emerging Markets Index ETF (EEM)
The Current Rating for “EEM” is: 3.92%
To find out what this score means, go here
What you need to know
Emerging Markets is one of the core asset classes in the fund management industry. The Morgan Stanley/Capital International (abbreviated as MSCI) is the most widely recognized series of indices and the MSCI Emerging Markets Index is the starting point for most Emerging Market themed funds. The Index is market cap weighted and further adjusted to compensate for free float and market accessibility.
What’s inside?
The fund gives a good exposure to all the up and coming economies that you read about in the financial press. Since the economies are not as developed as the G-7, it is perhaps not surprising to see such a heavy weighting in financials (25%) as banks have a more prominent role in developing economies. Although most emerging market banks avoided the worst of the toxic asset buying binge that contributed to the Global Financial Crisis, that has not always been the case.
As for countries, China, Brazil, South Korea, Taiwan, South Africa, India, Russia, Mexico, Malaysia and Indonesia are the main constituents of the fund.
When should you buy EEM?
While some Emerging Markets enthusiasts would say “anytime”, the truth is that enthusiasm for Emerging Markets waxes and wanes. Most of the Emerging Markets in this fund have spent the last 20-30 years integrating into the Global Trading System so “decoupling” is a theory which still needs another decade. What drives investment is the economic growth rates which are higher but also more volatile than what can be found in the developed economies. Therefore, International Capital Flows have a very large impact on valuations and index levels. When risk appetites are on the rise or Emerging Market growth rates feature prominently in the financial media, look for a surge of money to flow from the large mature markets to the smaller emerging markets. When the momentum fails, look to take profits. The EEM is a good way to play Emerging Markets if you do not know or have time to pick individual markets in the Emerging Market Asset Class.
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