A Global Fund Emerges

While my previous ETF Talk covered VTI, a fund that spans the entire American market, the Vanguard FTSE Emerging Markets ETF (VWO) differs by giving investors exposure to a swath of developing nations’ markets.

VWO adheres to an index that contains a large number of global companies, varying in size from small to large cap. The countries included in the index cover a wide range, including popular BRIC (Brazil, India, Russia and China) economies and less focal countries in the world of investing, such as South Africa. The index contains a large number of companies and weights them using a market-cap-based system.

Emerging markets had a disappointing 2014, and VWO fell 2.72%. However, this fund has begun a rebound and is already up 3.45% year to date in just more than a month of trading. VWO’s assets under management total $48 billion, making it the world’s fifth-largest ETF. The fund’s holdings match the index it tracks closely, including weightings. VWO’s 2.84% dividend yield offers income, and its expense ratio is a low 0.15%.

This ETF’s largest sector holdings are financial services, 28.98%; technology, 15.25%; and basic materials, 8.64%. VWO’s 10 largest investments hold 14.98% of its assets. These holdings include Tencent Holdings Ltd. (TCEHY), 1.98%; China Mobile Ltd. (CHLKF), 1.82%; Taiwan Semiconductor Manufacturing Company (TSM), 1.78%; China Construction Bank Corporation (CICHF), 1.76%; and Industrial and Commercial Bank of China Ltd. (IDCBY), 1.57%.

If you think 2015 could be the time when emerging markets rise above their lackluster performance of 2014 to become one of this year’s bull markets, then Vanguard FTSE Emerging Markets ETF (VWO) may be right for you.

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