The Vanguard Emerging Markets Fund (VEIEX and VWO) is a diversified emerging markets fund. VEIEX is a high risk, high returns stock index fund. It tracks the MSCI Emerging Market Index and, in eight of the past 10 years, has exceeded its peer average. The fund returned 29.71 percent of the one-year benchmark and 2.24 percent over the three-year benchmark. VEIEX’s low net expense ratio is just 0.32 percent. Vanguard Emerging Markets offers an ETF fund. The ETF version (VWO) tracks the FTSE Emerging Markets All Cap China A Transition Index.
Unlike traditional mutual funds, VEIEX is a passively managed fund. This index investment includes approximately 95 percent of net assets in plus or minus 480 common stocks of the Select Emerging Markets Free Index. As of the fund’s last filing, VEIEX performance ranked in the top nine percent (one year) and the top one percent over the three-year period. In this post, we discuss all you need to know about the Vanguard Emerging Markets Fund.
What Is the Vanguard Emerging Markets ETF (VWO)?
Vanguard is particularly known for its low-cost and wide variety of ETFs. VWO traces the same benchmarks as its index mutual fund. In general, ETFs offer more flexibility than traditional mutual fund investments.
5 Facts about the Vanguard Emerging Markets Fund
5 Tips for Profiting from the Vanguard Emerging Markets Fund
More on Vanguard Emerging Markets Fund
Smaller stocks tend to have less coverage from research departments, the dedicated investor can dig for bargains in the small capitalization universe. Let’s extend the last thought a bit more. Fewer analysts understand or cover emerging markets equities. Emerging markets businesses aren’t always faced with regulatory disclosure requirements. Also, insider holdings are often hidden. Political changes in China and Russia seem unpredictable.
Because Vanguard Emerging Markets Fund reflects a broad base of emerging markets names and a low turnover rate, analysts aren’t cherry-picking from a select few names. Low turnover is another reason to own Vanguard Emerging Markets. Consider that when you buy and sell ABC, the spread between the buyer and seller price is about a penny. Even if you’re trading a very liquid stock in high daily volume, it’s possible for enough buyers and sellers to push the price of ABC in the wrong direction.
Summing It Up
Diversification in a high risk, high return environment benefits the investor. Modern Portfolio Theory shows the importance of portfolio variance. Generally, this increases the chance of capital appreciation. Stock market industries go in and out of favor. Some sectors rise in a down market and vice versa. Typically, bond holdings add portfolio income. In the current historically low-interest rate environment, investors have put more money into stocks in search of average seven percent annual bond yields of earlier decades.
Diversification in an uncertain and wide universe of emerging markets stocks adds safety. Most importantly, VWO and VEIEX also offer liquidity to Western investors. Low expense ratios and no commission charges (with a Vanguard account) make the Vanguard Emerging Markets Fund an attractive choice for investors seeking long-term capital growth potential.
Have you enjoyed the perspectives of this article? Please share your opinions, observations and experience with us below!
Images taken from depositphotos.com.