75 % of my exposure to the market is held through an ETF as, 1. I wanted a diversified exposure, 2. the only emerging market component I know reasonable well is the Hang Seng. I just don´t know the marketplace well enough to pick individual stocks and I don´t feel confident that I have a shot at beating the overall market. As you probably know approximately 60 % of individual stocks underperform the overall market.
An ETF or Exchange Traded Fund is a fund that tracks an individual index such as the MSCI Emerging Market Index or the S&P 500. When you buy ETF shares you buy a portfolio which tracks the performance of its native index. ETFs don´t attempt to outperform the index, but replicate the index performance as cheaply as possible.
My criteria when choosing my emerging market ETF:
- Tracks the MSCI Emerging Market Index as closely as possible. I want exposure to all regions and company sizes
- Low cost
- Provided by a reputable ETF provider
- Tight spread between NAV (Net Asset Value) and trading price
- Solid liquidity
- Availability of performance measures
After conducting some due diligence I landed on iShares Emerging Markets UCITS ETF (acc) as the ETF was the best fit to my criteria. As illustrated below the fund tracks the index quite well, and the expense ratio is only 0.68 %. The ETF´s portfolio manager is the reputable manager Blackrock and the ETF is trading close to NAV which is a sign of solid liquidity. The availability of performance measures is decent and the ETF trades at various larger exchanges (http://www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P0000I5AI&tab=3).
MSCI Emerging Markets UC/TS ETF (ACC) performance:
Source: IShares
