It may be hard to believe, with global markets still pressured by ongoing conflict over the Strait of Hormuz, but now could be the time for emerging markets. Emerging markets can help investors diversify away from AI hyperscalers that already constitute big parts of portfolios. What’s more, those stocks have their own appeal and advantages worth considering.
Key Takeaways:
- Emerging markets stocks have a role to play right now in diversifying portfolios, with just 10 names comprising approximately 40% of the S&P 500.
- GEM has performed well over the last year, outperforming its ETF Database Category averages.
- GEM offers exposure to both East Asian tech names tied to global AI, as well as other emerging markets regions.
Right now, concentration risk remains a big issue for many portfolios. The top 10 holdings in the S&P 500 comprise nearly 40% of the entire index. Emerging markets equities can tap into some part of that supply chain, but with sufficient distance for diversification. What’s more, investors can also get exposure to countries on the rise, like India.
An ETF like the Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM ) provides a solid option therein. GEM charges a 35 basis point fee to track the Stuttgart Goldman Sachs ActiveBeta EM Equity Index. A multifactor index, it takes a proprietary approach, leaning into value, momentum, and quality to find standout names.
The active emerging markets stocks ETF has returned 17.8% YTD, according to ETF Database data. GEM has also returned 33% over the last 12 months. Those returns have helped the ETFs outperform the ETF Database Emerging Markets Equities category average over both time frames. It’s even outperformed over the last three years, as well.
See more: Equal Weight ETF GSEW Offers Diversification, Performance
GEM has benefited from a major allocation to Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) and other important tech-related names like SK Hynix (SKHY). The emerging markets stocks ETF has hefty allocations to India and China, as well.
Overall, then, investors can use an emerging markets ETF like GEM for performance and diversification. Adaptable and research-backed, an EM ETF could make for a solid addition for the second half.
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