Where Ray Dalio’s Investing

The valuations have become attractive here [View in browser]( Proprietary Data Insights Financial Pros Emerging Markets ETF Searches in the Last Month Rank Name Searches #1 iShares MSCI Emerging Markets ETF 1,102 #2 iShares Core MSCI Emerging Markets ETF 132 #3 iShares Emerging Markets Dividend ETF 131 #4 iShares MSCI Emerging Markets ex China ETF 75 #5 Vanguard Emerging Markets Stock Index Fund 37 #ad [3 Top Investment Trends]( Brought to you by [Calculated Risk]( [Insights From the Guy Who Called the 2007 Housing Crash]( Keep up with Bill McBride's takes on housing, finance, and macroeconomics in his free daily roundup with Calculated Risk blog. [Sign up now.]( Emerging Markets Say It Ain’t So, Ray Billionaire investor Ray Dalio made headlines recently when he told reporters that the U.S. stock market could face more pain if the Fed continues to hike interest rates. One place he’s parking his money is in emerging markets ETFs. Other financial pros have been actively searching for opportunities in this category too, according to the latest data from Trackstar, our proprietary sentiment indicator. It makes sense. Emerging markets stocks have grossly underperformed over the last five years and are now trading at attractive valuation multiples. According to Trackstar, the most widely searched emerging markets ETF is iShares MSCI Emerging Markets ETF (EEM), one of the most actively traded ETFs. We dug in to see if it’s worth your investment. iShares MSCI Emerging Markets ETF EEM exposes investors to large and midsize companies in emerging markets. It offers one of the easiest ways for investors to diversify internationally. Key Facts About EEM - Net assets: $22.9 billion - Number of holdings: 1,235 - Price-to-book ratio: 1.72x - Standard deviation (three-year average): 21.1% - 12-month trailing yield: 2.76% Of the 1,235 stocks the EEM portfolio holds, 22% are financial companies, 19% are in the information technology sector, and 14% are in consumer discretionary. Below, you’ll see the full breakdown. [Financials] Source: iShares The top 10 holdings comprise 22.6% of the portfolio’s weighting. The top three are Taiwan Semiconductor Manufacturing (TSM) at 5.81%, Tencent Holdings (TCEHY) at 3.94%, and Samsung Electronics (SSNLF) at 3.44%. You can see the full top 10 holdings and their weightings below. [Financials] Source: iShares Performance Over the last five years, the cumulative returns for the portfolio are -12.18%. But since its inception on April 7, 2003, EEM has returned 342% as of Q3 2022. Trading & Investing in EEM EEM is one of the most actively traded ETFs on the stock market. On average, 45.3 million shares trade daily. In addition, it’s one of the most actively traded and liquid option symbols. Income investors will be happy to hear it pays an annual dividend of $0.97, a current yield of 2.55%. Competition You’ve got options if you want exposure to international stocks in an ETF. They include iShares Core MSCI Emerging Markets ETF (IEMG), iShares Emerging Markets Dividend ETF (DVYE), iShares MSCI Emerging Markets ex China ETF (EMXC), and Vanguard Emerging Markets Stock Index Fund (VWO). Portfolio Comparison - EEM: A mix of value and growth, consisting mainly of large caps - IEMG : A mix of value and growth, consisting mainly of large caps - DVYE: Value-oriented, consisting mainly of midsize companies - EMXC: A mix of value and growth, consisting mainly of large caps - VWO: A mix of value and growth, consisting mainly of large caps As we noted, EEM has 1,235 positions in its portfolio. IEMG has 2,693, DVYE has 107, EMXC has 695, and VWO has 5,577. If you’re seeking diversification, VWO is clearly the best choice. DVYE has the most concentrated portfolio, consisting of high-yielding international stocks. Fees - EEM: 0.68% - IEMG : 0.09% - DVYE: 0.49% - EMXC: 0.28% - VWO: 0.08% EEM charges the highest fees at 0.68%, while VWO charges the lowest at 0.08%. As an investor, you want to keep your fees low, but if the returns are strong enough, you can justify paying higher fees. Dividend Yield - EEM: 2.55% - IEMG: 2.69% - DVYE: 10.19% - EMXC: 2.9% - VWO: 5.31% DVYE offers an attractive dividend yield of 10.19%. The next highest in the list is VWO at 5.31%. The others aren’t bad but don’t pack as hard of a punch. Performance Over the Last Five Years (Cumulative Returns) - EEM: -12.18% - IEMG : -7.42% - DVYE: -24% - EMXC: -1.34% - VWO: 4.49% Only VWO at 4.49% has had positive returns over the last five years. Meanwhile, DVYE has had the worst at -24%, followed by EEM at -12.18%. Emerging markets ETFs have underperformed significantly over the last five years relative to U.S. equities. For example, the S&P 500 has returned 55% over the last five years. [Will this be America’s worst crisis – EVER?]( One former Goldman Sachs trader is joining forces with a $1 billion money manager to issue a major warning to Americans with money in stocks. [Know More]( Our Opinion 6/10 After years of underperformance, the valuations of emerging market companies have become attractive. But if you need to pick just one ETF in the space, it should be VWO. It’s the most diversified and has had the best performance over the last five years. It also happens to be Ray Dalio’s largest investment in his fund. DVYE is also a viable option if you’re seeking income. While we don’t think EEM is a bad choice, we believe the alternatives are better. 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