Second, while the growth story for emerging markets is still intact, further improvements will be dependent on continued structural reforms. In China, this means liberalizing the financial sector, while India and Brazil (EWZ) need more infrastructure and less red tape.
Despite these risks, for investors with a three- to five-year horizon, the current discount in emerging market stocks makes emerging markets one of the few asset classes to appear genuinely cheap. Among specific emerging market countries, I continue to like China, Brazil and Russia and for investors seeking a less volatile strategy, I like the iShares MSCI Emerging Markets Minimum Volatility Index Fund (EEMV).
Market Realist – The graph above shows the performance of the iShares FTSE/Xinhua China 25 (FXI), the VanEck Vectors Russia ETF (RSX), and the iShares MSCI Brazil Index (EWZ) for 2014. They’ve given returns of 0.7%, -21.9%, and 3.0%, respectively. All three markets have underperformed the S&P 500 (SPY)(IVV). The S&P 500 gave its investors a return of 6.3%.
Although these markets have underperformed, these countries do look attractive over a long-term horizon.
For risk-averse investors, the iShares MSCI Emerging Markets Minimum Volatility Index Fund (EEMV) is a less volatile option that gives you access to emerging markets. This ETF is less risky, as its name suggests.
Please read Market Realist’s series 3 key reasons not to turn away from emerging markets to learn more about emerging markets.