If you’re an individual investor, you’ll likely benefit from investing your entire portfolio, or at least most of it, in ETFs. With that in mind, here’s an ETF I’m owning this year that I plan to never sell.
Vanguard FTSE Emerging Markets All Cap Index ETF
Vanguard FTSE Emerging Markets All Cap Index ETF (TSX:VEE) is a Canadian exchange-traded fund built on emerging market equities. ‘Emerging markets’ are markets that are less developed than the major Western markets and Japan. Examples include:
- China
- India
- Brazil
- Thailand
- Mexico
- Turkey
These markets are as large as many Western markets, but much cheaper (such as due to lower price-to-earnings ratios, book value, cash flows, etc.). The reason they are cheaper is because they are overlooked by the big US and European funds, either through simple ignorance or by fund managers who are somewhat suspicious of emerging market governments.
Despite the perceived ‘problems’ with emerging markets, they offer very good returns in some cases. China’s Hang Seng Index outperformed the S&P 500 last year. Taiwan is home to some of the most important technology companies in the world. India’s Nifty Fifty index has delivered solid returns over the past five years. All of these markets offer investors a lot, and in many cases they are much cheaper than their Western counterparts.
What VEE has in store
Vanguard FTSE Emerging Markets All Cap Index ETF holds a number of stocks from various emerging markets, including the following:
- China
- Taiwan
- India
- South Africa
- Brazil
- Saudi Arabia
- Mexico
These countries are among the cheapest and fastest growing and have some really great names:
- Alibaba.comThe world’s largest e-commerce company by gross merchandise volume and the leader in artificial intelligence in Asia.
- Tencent, the world’s largest gaming company.
- Taiwan semiconductor company, maker of 60% of the world’s computer chips and 90% of the most advanced chips.
- And much more.
VEE companies are among the most advanced, fastest growing and cheapest available. It is a truly attractive combination, which lends itself to a strong argument for investing in VEE.
Basic characteristics of the fund
Now that we’ve established that VEE holds shares in some very interesting markets, it’s now time to look at the fund’s basic features such as fees, liquidity, etc.
First of all, the fees. VEE has a management fee of 0.25%, which is a bit on the high side for a Vanguard fund, but lower than average for all ETFs. It is likely that Vanguard charges a higher fee for this fund due to the complexity of buying shares in many different jurisdictions with different rules. India in particular is known as a picky market.
Second, the fund has a dividend yield of 2.17%, which is about the same as the TSX.
Third and finally, the fund has a bid-ask spread of 0.042%. This is a bit wider than some funds I’ve looked at, and perhaps too high for day trading purposes. But for long-term holders it is not a problem.
Silly bottom line
The bottom line is that VEE is a well-managed ETF that invests in some of the youngest emerging markets in the world. The potential return is significant.
#buy #ETF #tomorrow #sell