Investing in Emerging Markets: Worth the RISK?
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- Опубликовано: 30 июл 2024
- Is investing in Emerging Markets via ETFs worth the risk?
🇪🇺 Best broker in Europe (ETFs): angelo.fi/ibkr 👇 Links below!
Let's discuss if investing in an Emerging Markets ETF or including EM stocks via the Vanguard FTSE All-World is a good idea based on their historical returns or if you're better off choosing an MSCI World or FTSE Developed World ETF instead!
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ℹ️ Time-Stamps:
00:00 GDP Growth vs Investment Returns
01:40 Pros of Investing in Emerging Markets
03:33 Cons of Investing in Emerging Markets
06:37 Differences Between FTSE All-World and FTSE Developed World
08:06 Is the Percentage of U.S. Stocks in World ETFs Too High?
09:05 Best Developed Markets ETF: MSCI World or FTSE Developed World?
10:06 Best Emerging Markets ETF
10:49 Global ETFs incl. EM
11:21 Should You Invest in Emerging Markets?
📈 ETFs mentioned (Acc = Accumulating, Dis = Distributing, ticker symbols in brackets):
Global (incl. EM):
Vanguard FTSE All-World Acc. (VWCE)
Vanguard FTSE All-World Dis. (VWRL or VGWL)
SPDR MSCI ACWI IMI Acc. (SPYI)
Developed Markets:
Vanguard FTSE Developed World Acc. (VHVE or VGVF)
Vanguard FTSE Developed World Dis. (VEVE or VGVE)
iShares Core MSCI World Acc. (IWDA)
SPDR MSCI World Acc. (SPPW)
HSBC MSCI World Dis. (WRD or H4ZJ)
Emerging Markets:
Vanguard FTSE Emerging Markets Acc. (VFEA)
Vanguard FTSE Emerging Markets Dis. (VFEM)
iShares Core MSCI Emerging Markets IMI Acc. (EMIM)
iShares Core MSCI Emerging Markets IMI Dis. (IBC3)
You can buy them using the best low-cost brokers in Europe for ETFs (links at the top☝️ if you'd like to support me).
Sources used:
worldeconomics.com/Regions/Em...
morningstar.com/portfolios/sh...
morganstanley.com/im/en-us/in...
curvo.eu/backtest
credit-suisse.com/about-us-ne...
trackingdifferences.com
msci.com/www/blog-posts/accou...
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Some of the links are affiliate links, which help support me and the RUclips channel. Still, none of the links are sponsored.
Disclaimer: I am only sharing my own experience. I'm not a financial advisor and you should always do your own research and due diligence before investing. Investing involves risk of losses.
Do you include Emerging Markets?
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Great video as always. I have a question I think you have not answered in any of your videos (please correct me if I am wrong).
Why using ETFs and not regular index funds? I particularly like IE00BYX5NX33 and IE00B03HD191, so I can invest in the MSCI ACWI with less comissions than the ETFs you mention. Furthermore, I will be able to switch to the distribution versions in the future without paying taxes (not possible with ETFs in Spain AFAIK). Is there anything I am missing?
They're not as easy to invest in most of the time, as most brokers don't offer them. Also, all the options I've seen so far actually slightly underperformed their ETF counterparts. Here are the two you mentioned vs. IWDA: www.fondsweb.com/at/vergleichen/ansicht/isins/IE00BYX5NX33,IE00B4L5Y983 and www.fondsweb.com/at/vergleichen/ansicht/isins/IE00B03HD191,IE00B4L5Y983 (sorry about the German, don't know another option right now).
Why exactly would you need to switch though? Why not just sell accumulating shares in retirement and simulate dividends to the same effect?
Thank you for this brilliant video and more importantly, thank you so much for using the correct map of india!!!! You have a new subscriber today 😊
You're very welcome! Happy to have you join the community! 🙏
Hi @@AngeloColomboFi, those are good points. Regarding the underperformance, I think it is not because they are not ETFs (could be due to having higher fees in the past).
For the dividend topic, I see your point; I think if you're mentally prepared to sell your positions in the future, you should be OK.
Thank you for your answer, your content is great.
The comparison table related to the less exposure we would get by investing in an emerging market to a developed one was great! Thanks.
Angelo, great video, thanks. what do you think about currency risk hedging on global investing? if euro go down vs usd and globally have you plan to hedge
Angelo - Molto interessante! Thank you!
Grazie Gabriele!
Thank you for another fantastic video. I really appreciate that you mentioned that many global companies are currently present in emerging markets and own some share in those markets. This means we as an investors can benefit from it. I believe EM suffer from immature or volatile political systems which is not worth the risk.
My pleasure!
Thank you for sharing your take as well!🙏
Great job, Johny. I would have checked this out earlier if i knew Johny Sins has a youtube channel.
Another great video 💪
Thank you!🙏
Great video. So far I was 100% in developed markets ETFs and stocks. I decided to add some exposure to EM as well only recently.
Thank you! Nothing wrong with that approach! Which ETFs did you end up going with?
In my tax-advantaged accounts a mix of: VWRA, SWDA and VUAA as I want to overweigh developed and USA.
Thank you for such a great video covering this topic, I found it really useful as always!
Happy to hear that!
liked your video before watching because I trust the quality of your content and I know it won't disappoint.
You saying that makes me very happy, thank you!🙏
Nice video. I have been a S&P 500 guy but recently I started including STOXX 600 to increase my indirect exposure to EM since europe does a lot of trading with this countries, even more than the US AFAIK. This way I can also control the ratio more easealy, I will try to have about 30% STOXX 600.
Thank you Luis! Doesn't sound like a bad plan either. Yes, European stocks seem to have higher exposure to EM economies on average. By adding the stoxx europe 600 you're also getting a nice overall bump in dividend yield in case that's something you value.
Great video Angelo.
Also, geopolitical forecasts list India and China as 3rd and 2nd most powerful Countries in 2030-2050, so it makes sense to invest in EM.
Thank you! Yeah, it's definitely not unreasonable to include EM stocks. Let's hope they manage to perform better going forward though🤞
Nice video. My preference is for developed world ex-UK - the UK hasn't performed well for many years, and that situation doesn't look like changing any time soon.
Thank you Matt! Does the missing UK share make that much of a difference (UK is 4,2% of the FTSE Developed)? I guess as long as you're not paying a higher fee it should be alright :)
@@AngeloColomboFi It probably doesn't make a huge difference. However, on Vanguard UK, the LifeStrategy® 100% Equity Fund is around 19% UK, which is wild.
Oh wow, ok that's a different story. Thank you for clarifying!
@@AngeloColomboFi I think they have developed world funds which are about 3% UK, which makes a bit more sense.
Thanks for your vidéo Angelo ! I started to invest monthly to VWCE and I'm saving a lot more than I used to. Have a good day
You're very welcome! That's great!
As an investor living in France I have around 5% of my actions portfolio invested in a CAC40 ETF which contains the 40 best french companies, like L'Oreal who sell a fair amount of their products to emerging markets, so I like to think that that gives me some exposure to EM. For the remaining 95% I'm stiking with an MSCI World for the time as it continu to perform very well (and outperforms the CAC40)
Sounds like a solid plan, thanks for sharing!
VGVF looks like a great ETF - I currently use Vanguard All World but i could well be tempted to convert!
I agree! In your case I'd definitely hold on to existing All-World shares though to minimize taxes if you're in profit and since there's so much overlap between the two anyway.
@@AngeloColomboFi gor sure. I still have some MSCI developed world with DEGIRO and will maintain that along with Vanguard on IB. Moving forward the 0.12 expense ratio and solid returns are tough to ignore with VGVF.
I think the key is whether you believe that 🇮🇳 and 🇨🇳 will introduce additional protectionist measures that will prevent foreign companies from operating freely there (e.g. Preventing 🇨🇳 gov officials from using iPhone).
I do believe that and that's why I allocate a little % of my portfolio to CSEMAS etf
True, but if that happens you also run the risk that they could block foreign investors from investing in their local stock markets as well.
Somehow I read "Christmas ETF" 😅
Jokes aside, your MSCI EM Asia sounds like a solid choice to add exposure to the region.
Thanks for the interesting video! 😄
My pleasure! 🙏
FTSE 70 / 30 Split and i am happy with it
Emergentes só Brasil e o ETF EEMA
Thank you for sharing info on Emerging market funds. Personally I don't invest in EM funds. As you mentioned in the late part of the video, most big companies from the US are doing business and generate revenues from emerging markets. Investing solely in SP500 is sort of indirectly investing in EM. Secondly, I don't like the volatility of EM funds.
You're welcome as always, Vince! Thank you for sharing your insights, which make sense, especially since you're US-based if I'm not mistaken.
@@AngeloColomboFi I’m based in 🇨🇦. I invest in both the US & Canada markets :)
Even better, thanks for clarifying :)
I agree with you completely, from japan.
I invest in US and Japanese market, especially large caps.
Good question. What’s the best VWO vanguard for low expenses??
VFEM is the European counterpart
Could you do video/tutorial on the IBKR platform
Hi Xander, have you seen this video already? ruclips.net/video/12g12UU8oPQ/видео.html
Do you need help with anything specific beyond that?
Good timing Angelo. This is a good one! I’m all in for the Ishares all world msci acwi, not too dissimilar to the VWCE but better off in the long run with my broker Scalable Capital as it’s on their partner list.
Thank you! That one is a great, simple all-in-one option as well!
Hello, what method do you have to follow fund overlap for ucits etf s
To avoid overlap between developed markets & emerging markets if you want to use two ETFs, I would either combine MSCI World + MSCI Emerging Markets or FTSE Developed World + FTSE Emerging Markets
Hello bro, good day!
It's your subscriber from Spain, still with doubts on that of the distribution VWTL, if I where buy this very ETF, my question is: first must I pay taxes on the dividend I receive from VWRL before reinvesting what's left manually to buy more shares? Please Angelo do clear my doubt! I will send you a detailed email like I promised so you can know my financial situation and to get your advice from the European investing perspective. Once again, thank you bro!
Hi! So I own the VWCE in my portfolio out I also bought shares of the ishares MSCI EM etf (IEMM), I'm about 3% up on the IEMM, should I sell that etf and invest the money in the VWCE or should I keep both etf's?
I can't answer that for you, really depends on how simple you want your portfolio to be long-term and if you think emerging markets will outperform or not (which nobody knows). You could also just hold on to it, while simple adding new cash to VWCE :)
My personal strategy is 75% msci world / 25% msci em ex china.
Angelo, what do you think about ex-china etfs?
Doesn't seem like a bad approach either, especially since the iShares MSCI EM Ex China costs the same (0,18% p.a.). That way you have a large 5,3% allocation to India overall (which I feel a lot more bullish about vs. China), but also 5,3% Taiwan (in case you're worried about China's impact on the country).
Great video! Given that India and China are already two of the biggest economies worldwide, could there ever be a time when they won’t be considered “emerging” anymore and therefore cause a shuffle in the way brokers like Vanguard and Blackrock split them across ETFs?
Thank you! Yes, that's always a possibility if they meet the requirements set by MSCI or FTSE for Developed Markets, which I'd argue is likely still far off though.
Ciao Angelo io avevo lo stesso dubbio ma sto continuando tutto su vwce, ti consiglio il video di ben Felix sugli emerging markets, molto interessante.
L'ho visto, ma anche lui non sembrava mica tanto convinto (a parte un market-cap approach come faccio io)
Hi Angelo, thanks for the video and all information you put out there. I've started with investing this year and I've made a decision to go with ~70/30 FTSE split. I wanna hear your opinion on it. I will put 400€ in FTSE Developed and 200€ in FTSE EM monthly. Thanks in advance!
Why overweight on EM?
It’s easy to turn away from EM considering downhill trend of the recent years and this way crystallising losses.
Feels like the classic investor’s mistake selling the asset in the worst time. So advice from me is if you already invested in EM, stick to it.
I'm about to dump my emerging market index fund. It's 7 percent of my portfolio. I don't think it's helping my portfolio - actually it's a waste of money and time. Better off putting that money into small and mid cap index funds. Most people actually have no idea what emerging market economies really are!
Luckily at only 7% it's not influencing your overall portfolio returns too much. But I understand the sentiment, EMs have performed very poorly the past 10+ years
India has the stable market as of now, even in 2022.There was no major impact in Indian market
System of the emerging market is critical. India has independent market regulators and well managed exchanges with common law and has a good Equity market that has captured return from the economic growth unlike China even though China has grown much more.
Great video as always Angelo.
One question and maybe a suggestion for a video.
You’re based in Austria but your preferred broker is IB.
Have you found relatively easy to declare your earnings to Finanzamt by yourself? Wasn’t the automatic earning reporting from Flatex sufficient to sway you to their side?
Would be curious to learn is your opinion.
Saludos
Thank you Italo! I think you missed my response to your other similar comment a few days ago, but here it is again:
I'm not your average Austrian investor. I'm self-employed (thus need to file taxes anyway) and additionally this finance RUclips channel is targeted towards all of Europe. As a result, I need to have first-hand experience as an investor with low-cost brokers that are able to serve most of the people watching.
While the tax reports on IB are useful (especially if you're investing in single stocks), they don't include everything you need to declare for ETFs on a yearly basis in Austria. That part is a lot more complicated, so I would honestly stick to Flatex. As long as you stick to their 1,5€ saving plans (recurring investments), your fees will be almost the same and you won't need to waste hours every year filing your taxes and tracking your shares separately on a long-term basis.
The closest low-cost alternatives so far would be Trade Republic and Scalable, which provide you with pretty good tax reports specifically for Austria on a yearly basis, which would make tracking easier but would still require you to file them every year: angelo.fi/etfs
Things are simple in investing. Not easy. Simple.
Everything else is gambling.
Have a nice day Angelo.
True! Simple is a lot harder to stick to than people think
Thanks for this well-informed video, Angelo! I’ve leaned a few new things again thanks to your research.
I’m investing in MSCI World myself because I think around 1500 companies is diversification enough and I don’t really believe in China, especially in the shorter term. Also, you’re paying almost double the TER for a fund that performs worse than the MSCI World. Just sounds like a bad deal to me. But of course, if India and China boom tomorrow, then you’ll be better off with the FTSE World and I’ll be hitting myself over the head 😂
That's great to hear! 🙏
Your reasoning makes sense, thanks for sharing!
How's your experience with 1000 monthly? Did you think of splitting it up? Is it difficult to do mentally?
Not sure I get what you mean, but this video might help: ruclips.net/video/yOWAhL6MFF8/видео.html
Dla zasiegu
english please 😅
Regarding P2P, i avoid investing in em, because there is huge political/economic risk, just look at russia/ukraine, also the same thing can happen with china/taiwan etc. Also the majority of loan originators that defaulted or stopped paying come from south america and africa.
I can understand that, the past few years have definitely shown that it's a lot harder to recover P2P funds from financially struggling lending companies based in Emerging Markets, since the legal systems aren't as robust.
You mentioned it briefly, but there are political risks for foreign investors in emerging markets, and this type of risk does not show in the data going back to 1900. In short, it means that those weak returns that you saw are even lower than advertised. When I see how Russia and China are acting right now with Ukraine, I'm genuinly wonder if I want them to use my capital to build their economies only to make war on us after. I'd rather keep this capital with the developped market.
The real question (prediction?!) am investor should ask himself to choose the investments style is: who will lead the world in 20 years time?!?!
Sure! But the second question then needs to be if capital markets in those countries are as open to foreign investors and if our rights are as well-protected as they are in developed markets. But I agree in principle, I also feel comfortable owning a small share of EM.
I own a small amount of EM funds as well as several REIT ETFs in Asia, Europe and the USA. I don’t trust myself enough to go all in on single stocks.
Why FTSE when there are iShares ETFs?
Personal preference, the FTSE ETFs by Vanguard hold a larger number of stocks etc. But either option is fine!
I have a theory that the US is outsourcing their inflation by taking their dollars abroad; traveling more, retiring early or working remotely in countries where the exchange rate is favorable. The American dream has changed to get out of the US as fast as possible. That's why investing in emerging markets and international ETFs may trend upward.
Would you choose iShares MSCI ACWI ETF or Vanguard FTSE All-World ETF?
IUSQ (0,20%) or VWCE (0,22%)
I prefer VWCE, it contains a significantly larger number of stocks, including a bit of Small Caps.
@@AngeloColomboFi IUSQ contains 2800 and VWCE like 3600. But SPYI (ACWI IMI) contains c. 9000 securities. I would say that SPDR MSCI ACWI IMI (SPYI) is the best option?
Thing is, developped world includes china, tailand, etc... and costs only 0.12... (at least that's what trader republic says)
Those are only a few stocks from Hong Kong, not anywhere close to what you get by including Emerging Markets via the FTSE All-World, which come with India and many more countries. But the FTSE Developed World is still broader than an MSCI World for example.
You could look at the Invesco FTSE All-World Acc. (0.15% TER), which has now grown enough in AUM to make it a good alternative!
@@AngeloColomboFi It says hong kong and China separatly though, maybe it's counting Taiwan as China??. I'll look into the Invesco though, thanks!!
Dont tell me to gently rap like button, i will smash it because of great contet🤣
I love to hear that! 🥂
Angelo, remember that if you invest in emerging market, you have the Chinese government as investing partner 😱
Good company 😅
HE is influencing to invest in the ETF in which He and His wife has invested. Totally wrong with emerging markets, Compare the Returns and invest and DONT BLINDLY INVEST ON HIS OPINIONS.
I agree that everyone should make up their own mind, don't quite get what exactly you're upset about though 😅
I make zero money from someone else choosing the same ETF we do or not