Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect emerging-markets companies to prosper over time as their typically fast-growing economies develop, yet you'd like the comfort of more established large-cap companies, the SPDR MSCI EM 50 ETF (NYS: EMFT) could save you a lot of trouble. If offers a basket of large enterprises in rapidly growing regions. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in a lot of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The SPDR ETF's expense ratio -- its annual fee -- is a relatively low 0.50%. The fund is very small, too, so if you're thinking of buying, beware of occasionally large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF doesn't really have a performance record to assess yet, as it's so new. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
What's in it?
Several large, emerging-market companies had strong performances over the past year. Brazil's beverage giant AmBev (NYS: ABV) , for example, gained 28%, and is one of the most profitable mega-cap companies around, with net profit margins rising in recent years -- to more than 30%. In its most recent quarter, revenue rose about 10%, and earnings 12%.
Taiwan Semiconductor (NYS: TSM) , meanwhile, gained 5%. Bulls like how it's gaining market share in chip production and think its long-term prospects are solid. Bears worry, though, that its near-term upside might be limited, as wafer shipments are growing faster than revenue for its customers, which may lead to bloated inventory levels. Patient investors can enjoy a 3% dividend yield.
Other companies didn't do as well last year. China-based solar-energy concern ReneSola (NYS: SOL) plunged 82% over the past year, making it no longer a large-cap company -- or even close to one. Its future looks weaker still, as it's saddled with more debt than cash and sports a negative gross margin, despite a recent rise in revenue.
Far less worrisome is India-based outsourcing specialist Infosys (NAS: INFY) , down 30%. The stock took a hit in April, when management reported earnings exceeding Wall Street expectations for its latest quarter, but also warned that the year ahead would be more dismal than expected, due to the slowness of the global recovery. Some worry, though, about competition, and wish for more information from the company.
The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
If you're looking for dividends and Taiwan Semiconductor's 3% doesn't cut it, check out our special free report, "Secure Your Future With 9 Rock-Solid Dividend Stocks," which will introduce you to a bunch of compelling stocks.
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