Stock Pick of the Week (4/13)
Overview
The Vanguard FTSE Emerging Markets ETF (VWO) is an emerging markets fund that gives investors exposure to thousands of companies across Asia, Latin America, Africa, and Eastern Europe. The ETF is managed by Vanguard, one of the most trusted asset managers in the world. A month ago, we recommended another Vanguard ETF, the High Dividend Yield ETF (VYM), which you can read about here. VWO is made up of 6,305 individual stocks, giving investors a diversified slice of economic growth from across the developing world.
VWO (Green) vs. VYM (Yellow) (1 year performance)
Specifics
The majority of VWO is composed of stocks from China (29.7%), Taiwan (26%), India (17.4%), and South Africa (4.7%). It holds large stakes in notable stocks, such as Taiwan Semiconductor and Alibaba, totaling $146.3 billion in assets under management. VWO has a dividend yield of roughly 2.60%, an attractive PE ratio of about 17x (vs. ~28x for the S&P 500), and an impressively low expense ratio of 0.06%.
Foreign Markets
International diversification within portfolios is more important now than ever. With the dollar weakening and geopolitical turmoil reshaping global trade, the more variety and variance a portfolio contains, the better off it will be. A domestically centered portfolio is exposed structurally to a single currency, a single central bank, and a single political cycle. Investing in foreign countries can both mitigate risk and offer higher returns, as developing countries often grow faster than developed ones. For instance, the International Monetary Fund projected 3.9% growth for emerging markets in 2026, versus 1.8% for developed markets. Emerging markets also have economies with lower borrowing costs and bank rates focused on stimulating growth within the respective countries.
Top Five Holdings
Why-to-Buy
VWO sits at the intersection of diversification, value, and structural long-term growth. It's backed by arguably the world's most trusted asset managers and contains an incredibly broad selection of companies. VWO is positioned incredibly well with current global tailwinds and its exposure to emerging markets, particularly India, which is projected to become the world's third-largest economy within the next decade. For investors looking to reduce domestic bias within their portfolio, capitalize on an impressive average earnings growth rate, and tap into the fastest-growing segments of the global economy, VWO is CFR’s pick of the week!