Emerging markets offer investors access to regions with faster economic growth, favorable demographics, and expanding consumer bases. While riskier than developed markets, they can provide long-term growth opportunities and important diversification. In this guide, we break down the best emerging market ETFs for long-term investors in 2025, using performance data, expert insights, and sector exposure comparisons.
Why Invest in Emerging Markets?
- Higher GDP growth rates: Many emerging economies, such as India and Vietnam, are forecasted to outpace the growth of developed countries.
- Demographic trends: Younger populations and a rising middle class boost consumption.
- Technological leapfrogging: Rapid adoption of fintech, e-commerce, and mobile tech fuels innovation.
- Undervalued equity opportunities: Some emerging market stocks trade at lower valuations than U.S. counterparts.
Risks to Consider
- Currency fluctuations
- Political instability
- Less regulatory transparency
- Sector concentration (e.g., financials or commodities)
Top Emerging Market ETFs for Long-Term Growth
1. Vanguard FTSE Emerging Markets ETF (VWO)
- Expense Ratio: 0.08%
- Assets Under Management: $80B+
- Holdings: Over 5,000 stocks
- Top Countries: China, India, Taiwan, Brazil
- Why it stands out: Extremely diversified and low-cost. Suitable for passive long-term investors.
2. iShares Core MSCI Emerging Markets ETF (IEMG)
- Expense Ratio: 0.09%
- AUM: $70B+
- Top Holdings: TSMC, Tencent, Reliance Industries
- Why it stands out: Includes small- and mid-cap stocks for broader exposure.
3. Schwab Emerging Markets Equity ETF (SCHE)
- Expense Ratio: 0.11%
- AUM: $10B
- Highlights: Good blend of low fees, diversification, and strong sector allocation.
- Best for: Cost-conscious investors who want exposure similar to VWO.
4. SPDR Portfolio Emerging Markets ETF (SPEM)
- Expense Ratio: 0.11%
- Key Features: Strong diversification, particularly in Asia
- Unique Benefit: Solid liquidity and often trades at low spreads
5. Invesco RAFI Strategic Emerging Markets ETF (ISEM)
- Expense Ratio: 0.35%
- Strategy: Smart beta – uses fundamental indexing
- Why it stands out: Targets value-oriented and profitable firms in emerging markets
- Best for: Investors seeking an alternative to market-cap weighted funds
Comparison Chart: Top Emerging Market ETFs (2025)
| ETF | Expense Ratio | AUM | Strategy | Notable Strength |
|---|---|---|---|---|
| VWO | 0.08% | $80B+ | Broad Market | Ultra low-cost diversification |
| IEMG | 0.09% | $70B+ | Broad Market w/ Small Caps | Inclusive exposure |
| SCHE | 0.11% | $10B | Broad Market | Strong Asia weighting |
| SPEM | 0.11% | $8B | Broad Market | Low trading spreads |
| ISEM | 0.35% | <$1B | Fundamental Indexing | Value-tilted exposure |
Expert Insights for 2025
"We believe EMs will benefit from easing U.S. interest rates and a soft dollar, especially in Asia-Pacific. ETFs like IEMG and VWO offer strategic positioning for a decade-long allocation."
— Natalie Tam, CFA, Emerging Market Strategist, Invesco
"Investors should look beyond China. India, Indonesia, and frontier markets are becoming increasingly relevant and under-owned."
— Rahul Gupta, Portfolio Manager, Schroders
What to Watch in 2025 and Beyond
- China Rebalancing: Shifts from real estate to consumer sectors
- India’s Boom: Manufacturing and tech sector expansion
- U.S. Rate Cuts: Could weaken the dollar and boost EM equities
- Commodity Prices: Key for Latin America and Africa exposure
Tips for Long-Term Investors
- Dollar-Cost Average (DCA): Smooths volatility over time
- Blend ETFs: Mix cap-weighted with smart-beta or active funds
- Rebalance Yearly: Maintain target allocations as markets move
- Monitor geopolitical shifts: Stay updated on trade policies, elections, and sanctions
Frequently Asked Questions
Q: Are emerging market ETFs a good long-term investment?
A: Yes, emerging market ETFs can offer strong long-term growth potential due to favorable demographics, industrial expansion, and rising consumer demand. However, they also carry higher volatility and geopolitical risk compared to developed market ETFs, so diversification and long-term holding periods are key.
Q: What are the risks of investing in emerging market ETFs?
A: Key risks include currency fluctuations, political instability, regulatory uncertainty, and liquidity issues. Some countries may also face U.S. sanctions or trade barriers. Investing through broad, well-managed ETFs helps mitigate some of these risks.
Q: Which regions drive growth in emerging market ETFs?
A: Asia (especially India, Vietnam, and Indonesia), Latin America (such as Brazil and Mexico), and parts of Africa are leading sources of growth. Many emerging market ETFs are heavily weighted toward China, but diversified options exist.
Q: Should I choose actively managed or passive emerging market ETFs?
A: Passive ETFs track broad indices like MSCI Emerging Markets and offer lower fees. Actively managed ETFs may outperform in volatile periods due to more tactical allocation but usually have higher expense ratios. Consider your risk tolerance and time horizon.
Q: How much of my portfolio should be in emerging market ETFs?
A: Most financial advisors suggest allocating 5–15% of your equity portfolio to emerging markets. Higher allocations may offer greater return potential but come with increased risk.
Summary
Emerging markets remain a compelling growth story for investors with a long-term horizon. ETFs like VWO, IEMG, and SCHE offer diverse, low-cost access to these regions. By understanding sector exposures, regional risks, and economic tailwinds, you can build a globally diversified portfolio with the potential to outperform over the next decade.