There are popular relatively low-cost emerging markets ETFs currently being offered, such as the iShares MSCI Emerging Markets Index Fund (symbol: EEM), which tracks the MSCI Emerging Markets Free Index. Another popular emerging markets ETF is the Vanguard Emerging Markets ETF (symbol: VWO), which tracks a slightly different emerging markets index, MSCI Emerging Markets Select Index. Both the iShares and the Vanguard ETFs are a good way to invest in emerging markets. However, both invest only around 40% of their assets in the BRIC countries.
I have been waiting for some time for a good BRIC ETF to be introduced that invests only in the BRIC countries. So far, two BRIC ETFs are trading on the market. The oldest is the Claymore BRIC ETF (symbol: EEB), which tracks the Bank of New York's BRIC Select ADR Index, as I discussed back in January 2007. The other BRIC ETF is the SPDR S&P Bric 40 ETF (symbol: BIK), which was introduced in June 2007 and tracks the S&P BRIC 40 Index.
Although I am glad that BRIC ETFs are finally available, I do not like either of the currently available BRIC ETFs. According to ETFconnect, the Claymore ETF invests in the BRIC countries according to these allocations:
- India - 13.56%
- China - 35.79%
- Brazil - 45.88%
- Russia - ???? (possibly 4.77%)
- India - 6.70%
- China - 40.05%
- Brazil - 26.75%
- Russia - 25.05%
I would prefer to see a BRIC ETF that invests about 25% of assets in each of the BRIC countries. Country-specific ETFs and ETNs are available for small investors to create their own relatively low-cost BRIC-tracking portfolio. I personally would invest according to the following allocation:
- Brazil - 25% - iShares MSCI Brazil Index Fund (symbol: EWZ)
- Russia - 25% - Market Vectors TR Russia ETF (symbol: RSX)
- India - 25% - iPath MSCI India Index ETN (symbol: INP)
- China - 25% - iShares FTSE/Xinhua China 25 Index Fund (symbol: FXI)