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NEW YORK ( ETF Expert) -- Many tag the first 10 years of the 21st century as a "lost decade" for stocks. Whether you look at 2000-2009 or 2001-2010, U.S. equities did indeed underperform a wide variety of assets.
For example, emerging market stocks were one of the more noticeable beneficiaries. Over the previous 10 years (7/24/2003-7/23/2012), the
iShares MSCI Emerging Market Fund(EEM) massively outperformed the
SPDR Select S&P 500(SPY).
Many have described the circumstances as an epic transfer of wealth from the developed world to developing economies. Yet, the asset class has been severely hampered by the eurozone calamity, far more so than U.S. stocks.
The two-year-long crisis has pushed investors away from the risks associated with lesser-known emerging market companies; many have moved back to well-established U.S. brands. What's more, investors are flocking to the familiar confines of the once-maligned U.S. dollar. They're purchasing longer-term U.S. Treasuries -- instruments offering interest payments that are lower than the inflation rate -- in order to protect against a European meltdown.
Standard & Poor's 500 may have been flat in 2011, yet that was far more desirable than the bearish -20% experienced by the MSCI Emerging Market Index. Here in 2012? The S&P 500 SPDR Trust is up 8.5% to the iShares MSCI Emerging Market Fund's year-to-date return of 0%. Worse yet, EEM is in a technical downtrend.
With the shadow of Europe's debt dilemma hanging over risk assets from stocks to commodities to higher-yielding bonds, why might you bother with anything that is "emerging?"
Essentially, the MSCI Emerging Market Index, whether tracked by EEM or
Vanguard Emerging Markets(VWO), is heavily tied to energy, materials and commodity production. There are a
number of emerging market ETFs
that track less-volatile indices and/or favor non-cyclical economic segments and/or tap uniquely successful countries.
Here, then, are three emergers that are worthy of a first (or second) look:
iShares Emerging Market Minimum Volatility(EEMV)
Just as the less-volatile sectors of the U.S. economy (e.g., consumer staples, health care, telecom, utilities, etc.) have worked wonders for U.S. investors, the recent trend toward lower beta has captured the imagination of emerging market investors.