Emerging markets exchange-traded funds (ETFs) offer investors exposure to economies experiencing rapid growth and industrialization but still facing higher volatility and structural challenges than developed nations. Many of the world's largest non-NATO economies belong to BRICS countries -- Brazil, Russia, India, China, and South Africa -- all of which are classified as emerging market countries.
Investing in emerging markets through an ETF helps avoid the complexities of currency conversion, provides diversified exposure across multiple sectors and regions, and reduces the risks of picking individual stocks in unpredictable economies.
5 Best in 2025
5 Best emerging market ETFs in 2025
Here's a look at some of the best overall emerging markets ETFs, offering broad diversification, exposure to high-growth economies, and suitability for a wide range of investors. Some are index funds, while others are actively managed.
1. iShares Core MSCI Emerging Markets ETF
The iShares Core MSCI Emerging Markets ETF (IEMG 0.8%) is one of the most comprehensive emerging markets ETFs. It holds more than 2,700 stocks across large-, mid-, and small-cap companies within the MSCI Emerging Markets Investable Market Index.
The fund is market-cap weighted, meaning larger economies dominate its holdings. In early 2025, China (28.62%), India (18.22%), Taiwan (18.21%), and South Korea (9.62%) made up the bulk of the portfolio.
This ETF is widely popular, with $82 billion in assets under management (AUM), making it one of the most liquid emerging markets ETFs, with a tight 0.02% 30-day median bid-ask spread. While its 10-year annualized return sits at 3.82%, this reflects the underperformance of emerging markets relative to developed markets and the strength of the U.S. dollar, which has weighed on foreign equity returns.
2. Vanguard FTSE Emerging Markets ETF
The Vanguard FTSE Emerging Markets ETF (VWO 0.64%) is one of the largest and most diversified emerging markets ETFs. It tracks the FTSE Emerging Markets All Cap China A Inclusion Index for a low 0.07% expense ratio. One key difference between this fund and the iShares Core MSCI Emerging Markets ETF is that it does not include South Korea because FTSE classifies it as a developed market.
Another unique feature is the China A Inclusion designation. This designation means the fund holds Chinese stocks from the Shanghai and Shenzhen exchanges rather than just H-shares traded in Hong Kong.
With more than 5,800 holdings, the Vanguard FTSE Emerging Markets ETF is even more diversified than the iShares Core MSCI Emerging Markets ETF, making it a broad-based, cost-effective way to access emerging markets. It is also available as a mutual fund.
3. SPDR Portfolio Emerging Markets ETF
The SPDR Portfolio Emerging Markets ETF (SPEM 0.62%) is part of SPDR's Portfolio lineup, which focuses on broad, diversified, and low-cost index-tracking funds. This ETF follows the S&P Emerging BMI Index (Broad Market Index), which covers small-, mid-, and large-cap stocks across emerging markets.
While the underlying index includes 6,756 stocks, the SPDR Portfolio Emerging Markets ETF holds slightly more than 3,000 due to the sampling methodology. The fund avoids illiquid or extremely small companies that don't significantly affect overall market returns, improving efficiency while maintaining broad exposure.
The ETF is market cap-weighted, with its largest country allocations in China (33.21%), India (20.01%), Taiwan (19.41%), and Brazil (4.50%). The SPDR Portfolio Emerging Markets ETF has posted a 4.24% annualized return over 10 years. It remains a low-cost option with a 0.07% expense ratio, making it a solid choice for investors looking for broad emerging market exposure with minimal fees.
4. Schwab Emerging Markets Equity ETF
The Schwab Emerging Markets Equity ETF (SCHE 0.63%) tracks the FTSE Emerging Index while maintaining a low 0.11% expense ratio. The fund holds around 2,000 stocks, offering a well-diversified mix of small-, mid-, and large-cap companies.
Despite including smaller stocks, the Schwab Emerging Markets Equity ETF is market cap-weighted, meaning larger companies dominate its portfolio. This has resulted in a weighted average market capitalization of $169.18 billion (as of January 2025), giving the fund a tilt toward large-cap stocks, similar to other major emerging markets ETFs.
Over the past 10 years, the Schwab Emerging Markets Equity ETF has delivered a 3.70% annualized return. This reflects the broader underperformance of emerging markets compared to developed markets but still serves as a low-cost option for long-term investors seeking emerging market exposure.
5. Avantis Emerging Markets Equity ETF
Unlike traditional index-tracking ETFs, the Avantis Emerging Markets Equity ETF (AVEM 0.89%) takes an active approach by selecting emerging market stocks with higher expected returns rather than simply following a benchmark.
The Avantis Emerging Markets Equity ETF systematically screens stocks based on multiple factors, prioritizing smaller companies, undervalued stocks, and highly profitable businesses. This factor-based strategy aims to outperform traditional market cap-weighted emerging market ETFs over time.
Despite its active approach, this fund remains broadly diversified, holding more than 3,522 stocks across various emerging markets. It also maintains a reasonable 0.33% expense ratio, making it an affordable choice for investors seeking enhanced emerging market exposure.
Over the last five years, the Avantis Emerging Markets Equity ETF has returned 6.85% annually. This has allowed it to outperform many passive emerging market ETFs while maintaining a diversified and cost-effective portfolio.
Top criteria
Criteria for selecting the top emerging markets ETFs
When choosing the best emerging markets ETFs, we focused on three key factors. First, broad diversification is essential. A strong emerging markets ETF shouldn't be concentrated in a single country, like China, or in a niche sector, such as Indian tech companies. Instead, it should provide exposure across multiple regions and industries, reducing the risk of any one economy or sector dragging down returns.
Second, low fees make a big difference in long-term returns. Many passive ETFs now have expense ratios below 0.10%, keeping costs minimal. Even actively managed ETFs can offer reasonable fees under 0.50%, making them competitive alternatives to passive funds.
Finally, we prioritized funds with at least $1 billion in assets under management. Well-capitalized ETFs tend to have higher liquidity, tighter bid-ask spreads, and lower tracking errors, making them more efficient investment vehicles.
Related investing topics
Should I invest?
Should I invest in Emerging Market ETFs?
The real question is whether you can handle watching U.S. stocks underperform for a decade while emerging markets take off -- without giving in to FOMO (fear of missing out). Many investors struggle with this because they tend to chase past performance rather than stick to a diversified strategy.
This scenario isn't just theoretical; it has already happened. During the lost decade of 1999-2009, U.S. stocks delivered negative returns while emerging markets significantly outperformed. Investors with well-balanced global portfolios benefited from exposure to economies that were thriving even as the U.S. lagged.
For most investors, it's prudent to allocate at least 10% to 20% of a portfolio to emerging markets and rebalance periodically. While the U.S. remains a dominant contributor to global gross domestic product (GDP), history has shown that economic leadership shifts over time -- and the next big winner may not be the one you expect.
FAQ
Emerging market ETF FAQ
What are the potential benefits of investing in emerging markets ETFs?
Emerging markets ETFs offer higher growth potential than developed markets, diversification benefits, and exposure to economies with expanding middle classes, increasing industrialization, and improving financial markets.
What risks should I be aware of when investing in emerging markets ETFs?
Emerging markets come with higher volatility, political and regulatory risks, currency fluctuations, and liquidity concerns, making them more unpredictable than developed markets.
How do emerging markets ETFs differ from developed markets ETFs?
Emerging markets ETFs invest in countries with developing economies, which often have higher growth but more instability. Developed markets ETFs focus on established economies, like Europe and Japan, with more mature financial systems and lower volatility.
What is the tax treatment for dividends and capital gains from emerging markets ETFs?
Dividends from emerging markets ETFs may be subject to foreign withholding taxes at source. In contrast, capital gains are taxed based on U.S. or local jurisdiction tax laws, depending on the investor's location and account type.
