Why the MSCI Emerging Markets ETF can get stronger now and what investors should do

Why the MSCI Emerging Markets ETF can get stronger now and what investors should do

According to a report by www.boerse-online.de,
Over the last 5 years, the MSCI World ETF has returned an average of 12.8 percent per year, while the MSCI Emerging Markets ETF has only returned 3.68 percent per year over the same period. However, this could soon change as the MSCI Emerging Markets ETF may be gaining strength.

Why the MSCI Emerging Markets ETF can now become stronger again

A main reason for the MSCI Emerging Markets ETF's weakness so far has been its heavy weighting in China stocks. Due to political intervention by the Chinese government, investors fled Chinese stocks, weighing on the index. However, the Chinese government recently announced measures to support Chinese stocks, causing the market to rise. This could have a positive impact on the MSCI Emerging Markets ETF.

Better than the MSCI World ETF?

There are numerous products on the MSCI Emerging Markets that vary significantly in cost, tracking method and dividends. According to MSCI, the emerging markets ETF has had an annual return of 7.55 percent since 2000, higher than the MSCI World's 6.18 percent over the same period. However, it is recommended to continue investing in the MSCI World ETF as it produces solid returns. However, if you have not yet invested in an ETF on the emerging markets, you can diversify 20 to 30 percent of your portfolio with this product. At present, however, the emerging markets ETF is still seen as significantly riskier and more volatile than the MSCI World.

So, current developments in China and the potential rally in emerging markets could motivate investors to consider the MSCI Emerging Markets ETF. However, this should always be done taking into account the higher risk and as part of a diversified investment strategy.