Vanguard Emerging Markets Shares Index Fund (ASX: VGE) could be the best way to invest in emerging markets.
What is Vanguard?
Vanguard is a funds management business that is owned by its own investors. It was founded in 1975 and now has (or had) around AU$9.7 billion. It has 192 funds in the US, and 232 funds in markets outside the US. It’s a world leader in providing low-cost ETFs.
What is an ’emerging market’?
The idea is that emerging market countries are ones that are fully ‘developed’ yet like Australia, but have economies that are growing at a relatively attractive rate as they catch up to the economies of the developed world.
If you’re invested in companies which have the advantage of a growing economy then you’d hopefully see the earnings grow at a good pace too.
The countries that get the highest allocations are: China, Taiwan, India, Brazil, South Africa, Russia, Thailand, Saudi Arabia, Malaysia, Mexico, Indonesia, Philippines and Qatar.
However, be aware that 42.2% of this fund is invested in Chin and another 15.4% is invested in Taiwan.
What are some of the shares that VGE is invested in?
Vanguard Emerging Markets Shares Index Fund is invested in over 5,000 businesses, which is a lot of diversification.
Looking at the underlying ETF, 24.3% of it is invested in financial shares, 19.5% is invested in technology, 15% is allocated to consumer services, 8.9% is allocated to industrials, 8.5% is allocated to consumer goods and so on.
In terms of actual shares owned, these are the biggest positions: Alibaba, Tencent, Taiwan Semiconductor Manufacturing, China Construction Bank, Naspers, Meituan Dianping, Ping An Insurance, Reliance Industries, Industrial & Commercial Bank of China and JD.com.
Is Vanguard Emerging Markets Shares Index Fund worth buying?
It has a fairly high management fee compared to most other Vanguard ETFs of 0.48%. It’s probably the best way to get diversified exposure to emerging markets in Australia. However, there is a large exposure to countries you may not wish to be invested in like Russia or Brazil.
With all the Asian investments you may as well be invested in Vanguard FTSE Asia ex Japan Shares Index ETF (ASX: VAE).
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