Emerging Markets Small-Cap Value Funds
There are at least two good reasons why most investors should consider investing a portion of their portfolios in emerging market stocks:
- Emerging Market stocks have higher expected returns than similar non-emerging market stocks (albeit with higher risk).
- Emerging Market stocks tend to have relatively low correlations with other asset classes, so including them in a portfolio should improve the portfolio's risk/return characteristics.
For more information on Emerging Markets, see here.
There are several similar-seeming investment options available. Which is best?
The funds are listed in rough order of our overall preference.
Preferences are listed separately for use in retirement accounts and for taxable accounts.
For a listing of our preferences in other asset classes, see here.
Retirement Accounts (i.e., tax-deferred or tax-exempt accounts)
- DFA Emerging Markets Targeted Value Portfolio (DEMGX). E/R: 0.68%. This fund invests in small-cap value stocks with higher profitability, in emerging mkts.
- WisdomTree Emerging Markets SmallCap Dividend Fund (DGS). E/R: 0.58%. This ETF attempts to track the WisdomTree Emerging Markets SmallCap Dividend Index of emerging market small cap dividend-paying stocks. This index begins with the 10% smallest (in market cap) stocks in the WisdomTree Emerging Markets Dividend Index, and then weights them by total dividend payout. Further, DGS is apparently less diversified than DEMGX, including only dividend-paying stocks.
Taxable Accounts
- WisdomTree Emerging Markets SmallCap Dividend Fund (DGS). E/R: 0.58%. This ETF attempts to track the WisdomTree Emerging Markets SmallCap Dividend Index of emerging market small cap dividend-paying stocks. This index begins with the 10% smallest (in market cap) stocks in the WisdomTree Emerging Markets Dividend Index, and then weights them by total dividend payout. Further, DGS is apparently less diversified than DEMGX, including only dividend-paying stocks.
- DFA Emerging Markets Targeted Value Portfolio (DEMGX). E/R: 0.68%. This fund invests in small-cap value stocks with higher profitability, in emerging mkts.
This web page contains the current opinions of Eric E. Haas at the time it is written—and such opinions are subject to change without notice. This web page is intended to serve two purposes:
- To educate the public; and
- To provide disclosure of Mr. Haas' opinions to prospective clients. We believe that prospective clients are well-served by being made aware of what they are buying—and what they are buying is advice that is based on these opinions.
We believe the information provided here to be useful and accurate at the time it is written. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed.
No investor should invest solely on the basis of information listed here. Before investing, it is important to consult each prospective investment's prospectus and consider both its risk/return characteristics and its effect on your overall portfolio.
This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Altruist recommends consultation with a qualified tax adviser, CPA, financial planner, or investment adviser. If you would like to discuss the rationale or support for any particular idea expressed on this web page, feel free to contact us.