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Long-Term Prospects for Emerging Markets Puts 3 Funds on Top
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Certain global trends may be turning into tailwinds for the emerging markets this year. The Fed’s dovish outlook, economic stimulus in China and a possible resolution to the U.S.-China trade war in the near term are some major positives poised to help emerging markets grow faster.
Emerging Markets Could Outpace U.S. Markets
Emerging markets have put up a solid performance since the beginning of this year, with the MSCI Emerging Markets Index registering 10.8% growth on a year-to-date basis. Political stability in the emerging economies and their central banks turning more accommodative have boosted emerging markets.
According to Jim Paulsen of The Leuthold Group, emerging markets have considerably outperformed developed markets during the final years of economic and market cycles for the last three bull markets since the mid-1990s. Given the positive political and economic factors affecting the region this year, emerging markets should perform better, a Market Watch report cited.
Dovish Fed, Trade Deal to Boost Emerging Markets
The Federal Reserve has adopted a defensive stance this year among global growth worries by keeping its benchmark rates unchanged. While this dovish attitude may not be good news for American lenders owing to the lower interest rates and a flatter yield curve, it could prove highly beneficial for the emerging markets.
An accommodative Fed tends to weaken the dollar, which could boost emerging-market stocks. After all, a weak greenback drives commodity prices higher. Since many emerging countries sell commodities, they stand to benefit.
In addition to the Fed’s dovishness, a possible trade deal between the world’s two largest economies could propel emerging market stocks higher. American and Chinese officials are set to meet in Beijing next week to conclude a trade deal, which could surely diminish tensions over tariffs and raise interest in emerging markets.
Emerging Market Stocks Less Pricey
Investing in emerging markets takes significantly less capital as emerging-market stocks are less inexpensive than U.S. stocks. Also, emerging-market securities are largely under-owned and are likely to turn around. Fund managers will feel the need to raise their exposure to emerging-market securities as they outperforms.
China’s Measures to Fuel its Slowing Economy
The Chinese government, in particular, has implemented steps to stimulate its slowing economy amid global growth worries, which could definitely boost corporate earnings and equities.
Per a CNBC report, the country’s central bank pushed 560 billion yuan (about $83 billion) into its banking system in a bid to ease its stressed economy. This measure could boost the overall scenario for the emerging markets in Asia.
Why Invest in Emerging Market Mutual Funds?
Despite the encouraging factors in emerging markets, owning their stocks could prove difficult for American retail investors. Therefore one can increase their portfolio’s exposure to emerging market securities through mutual funds.
We have highlighted three mutual funds that invest in emerging markets and are well-positioned for gains. These funds also carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.
We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
DWS Emerging Markets Equity S (SEMGX - Free Report) aims for long-term capital appreciation. The fund invests a minimum of 80% of its net assets in equity securities of emerging market companies. The fund has minimum initial investment of $2500. As of Feb 28, 2019, SEMGXhad 21.8% of its investments in China.
This Sector - Non-US Equity product has a history of positive total returns for over 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
SEMGX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 1.01%, which is below the category average of 1.36%. The fund has three and five-year returns of 16.5% and 5.5%, respectively.
Fidelity Series Emerging Markets Debt (FEDCX - Free Report) seeks high total return. The fund invests the majority of its net assets in securities of emerging-market issuers. FEDCX is a non-diversified fund.
This Sector - Non-US Equity product has a history of positive total returns for over 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FEDCX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0%, which is below the category average of 1.08%. The fund has three and five-year returns of 8.3% and 5.5%, respectively. The fund has no minimum initial investment.
JPMorgan Emerging Markets Equity A (JFAMX - Free Report) aims to provide high total returns by investing in a portfolio of equity securities from emerging-market companies. The fund is known to invest at least 80% of its net assets in investments of emerging markets.As of Feb 28, 2019, the fund had 20.4% of its investments in China.
This Sector - Non-US Equity product has a history of positive total returns for over 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
JFAMX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 1.24%, which is below the category average of 1.36%. As of Feb 28, 2019, the fund has three and five-year returns of 17.2% and 5.6%, respectively. The fund has minimum initial investment of $1000.
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Long-Term Prospects for Emerging Markets Puts 3 Funds on Top
Certain global trends may be turning into tailwinds for the emerging markets this year. The Fed’s dovish outlook, economic stimulus in China and a possible resolution to the U.S.-China trade war in the near term are some major positives poised to help emerging markets grow faster.
Emerging Markets Could Outpace U.S. Markets
Emerging markets have put up a solid performance since the beginning of this year, with the MSCI Emerging Markets Index registering 10.8% growth on a year-to-date basis. Political stability in the emerging economies and their central banks turning more accommodative have boosted emerging markets.
According to Jim Paulsen of The Leuthold Group, emerging markets have considerably outperformed developed markets during the final years of economic and market cycles for the last three bull markets since the mid-1990s. Given the positive political and economic factors affecting the region this year, emerging markets should perform better, a Market Watch report cited.
Dovish Fed, Trade Deal to Boost Emerging Markets
The Federal Reserve has adopted a defensive stance this year among global growth worries by keeping its benchmark rates unchanged. While this dovish attitude may not be good news for American lenders owing to the lower interest rates and a flatter yield curve, it could prove highly beneficial for the emerging markets.
An accommodative Fed tends to weaken the dollar, which could boost emerging-market stocks. After all, a weak greenback drives commodity prices higher. Since many emerging countries sell commodities, they stand to benefit.
In addition to the Fed’s dovishness, a possible trade deal between the world’s two largest economies could propel emerging market stocks higher. American and Chinese officials are set to meet in Beijing next week to conclude a trade deal, which could surely diminish tensions over tariffs and raise interest in emerging markets.
Emerging Market Stocks Less Pricey
Investing in emerging markets takes significantly less capital as emerging-market stocks are less inexpensive than U.S. stocks. Also, emerging-market securities are largely under-owned and are likely to turn around. Fund managers will feel the need to raise their exposure to emerging-market securities as they outperforms.
China’s Measures to Fuel its Slowing Economy
The Chinese government, in particular, has implemented steps to stimulate its slowing economy amid global growth worries, which could definitely boost corporate earnings and equities.
Per a CNBC report, the country’s central bank pushed 560 billion yuan (about $83 billion) into its banking system in a bid to ease its stressed economy. This measure could boost the overall scenario for the emerging markets in Asia.
Why Invest in Emerging Market Mutual Funds?
Despite the encouraging factors in emerging markets, owning their stocks could prove difficult for American retail investors. Therefore one can increase their portfolio’s exposure to emerging market securities through mutual funds.
Moreover, reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Our Choices
We have highlighted three mutual funds that invest in emerging markets and are well-positioned for gains. These funds also carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.
We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
DWS Emerging Markets Equity S (SEMGX - Free Report) aims for long-term capital appreciation. The fund invests a minimum of 80% of its net assets in equity securities of emerging market companies. The fund has minimum initial investment of $2500. As of Feb 28, 2019, SEMGXhad 21.8% of its investments in China.
This Sector - Non-US Equity product has a history of positive total returns for over 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
SEMGX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 1.01%, which is below the category average of 1.36%. The fund has three and five-year returns of 16.5% and 5.5%, respectively.
Fidelity Series Emerging Markets Debt (FEDCX - Free Report) seeks high total return. The fund invests the majority of its net assets in securities of emerging-market issuers. FEDCX is a non-diversified fund.
This Sector - Non-US Equity product has a history of positive total returns for over 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FEDCX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0%, which is below the category average of 1.08%. The fund has three and five-year returns of 8.3% and 5.5%, respectively. The fund has no minimum initial investment.
JPMorgan Emerging Markets Equity A (JFAMX - Free Report) aims to provide high total returns by investing in a portfolio of equity securities from emerging-market companies. The fund is known to invest at least 80% of its net assets in investments of emerging markets.As of Feb 28, 2019, the fund had 20.4% of its investments in China.
This Sector - Non-US Equity product has a history of positive total returns for over 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
JFAMX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 1.24%, which is below the category average of 1.36%. As of Feb 28, 2019, the fund has three and five-year returns of 17.2% and 5.6%, respectively. The fund has minimum initial investment of $1000.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>