Choosing an International ETF: The Case For the Developed Market Favorite vs. the Low-Cost Emerging Challenger
Key PointsVanguard FTSE Developed Markets ETF offers a lower expense ratio and a higher dividend yield than iShares Core MSCI Emerging Markets ETF.
Investors seeking a low-cost, globally diversified approach to equities may find two separate options appealing. Vanguard FTSE Developed Markets ETF (VEA) and iShares Core MSCI Emerging Markets ETF (IEMG) both offer a means to broaden a portfolio beyond U.S. borders. However, the two strategies diverge significantly. VEA invests in mature economies like Canada, Europe, and the Pacific.
Conversely, IEMG targets emerging markets like Taiwan, South Korea, and China. These differing focuses create notable contrasts between the two. One key difference is historical performance. Over the past five years, VEA has generated a total return of 57%, translating to a CAGR of 9.5%. In comparison, IEMG has delivered a total return of 45%, with a CAGR of 7.7%.
Dividend income also differentiates the two. VEA offers a yield of 2.4%, slightly above IEMG's 2.2%. Lastly, costs reveal another distinction. VEA's expense ratio of 0.03% is considerably lower than IEMG's 0.09%. Considering these factors, VEA appears more favorable for investors prioritizing broad international exposure, lower fees, higher yields, and superior returns.
However, those seeking stronger representation of East Asian equities might still find value in IEMG's strategy, despite its slightly higher expense ratio.
Written by urgent.news from Motley Fool's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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