While the Canadian equity market itself offers investors lots of opportunity to diversify in terms of sector, global diversification is also important. Investors should always consider emerging markets when building a balanced portfolio. These markets are riskier but in good times they can easily outperform developed world markets, generating significant returns for investors.
Canadian investors can gain exposure to emerging markets by directly investing in equities and bonds. However, that is not always easy, given the restrictions in some of the emerging markets. An easier way to gain exposure to emerging markets and diversify your portfolio is through ETFs.
Here are 2 ETF's that provide exposure to emerging markets. BMO MSCI Emerging Markets Index ETF (TSX: ZEM) and Vanguard FTSE Emerging Markets All Cap Index ETF (TSX: VEE).
ZEM has been designed to replicate the performance of the MSCI Emerging Markets Index, net of expenses. The fund only invests in emerging markets equity. The ETF has $150 million in net assets and offers an annualized distribution yield of 2.52%.
VEE currently tracks the performance of the FTSE Emerging Markets All Cap China A Inclusion Index. The fund’s holdings total 3,413 as of January 31, 2016.
