Investors who have a long-term investment horizon and an above-average risk appetite may want to consider Latin America exposure for overlooked markets. This region has lately been the target for investment because of its growing economies in the recent past, while many nations are also expected to post health growth rates going forward as well (Broad Latin America ETF Investing 101).
According to a report from Morningstar, the International Monetary Fund’s (IMF) economic data for Latin America was 3.7% GDP growth for 2012 and a 4.1% prediction for 2013. So, the economy of Latin America is poised for solid, albeit modest, levels of growth going forward.
In particular, Brazil, Mexico, Chile and Peru, which comprises the Latin American region, have seen outstanding growth in the past few months. This trend is expected to sustain in the future thanks to quickly growing populations and strong commodity prices.
After all, these nations are major natural resource producers and key exporters of many commodities. Though the stalemate in Europe and slowing growth in China are expected to hamper export to these regions, there is some hope that these markets will turn things around in 2013 and keep prices high for a number of resources (Peru ETF Investing 101)
In addition to the commodities and the growing populations, investors can also look forward to the rapidly expanding consumer market in the region. Latin America has experienced a huge increase in middle class numbers as more than 50 million more middle class households were added to the ranks in 2011 alone (Forget Argentina, Buy These Latin America ETFs Instead).
With that being said, investors seeking to invest in this part of the world in basket form have Market Vectors Latin America Small-Cap ETF as an option. LATM is rated Zacks Rank 1 or Strong Buy and is expected to outperform its peers in the next one year.
About the Zacks ETF Rank
The Zacks ETF Rank provides a recommendation for the ETF in the context of our outlook for the underlying industry, sector, style box, or asset class. Our proprietary methodology also takes into account the risk preferences of investors. ETFs are ranked on a scale of 1 (Strong Buy) to 5 (Strong Sell) while they also receive one of three risk ratings, namely Low, Medium, or High.
The aim of our models is to select the best ETFs within each risk category. We assign each ETF one of five ranks within each risk bucket. Thus, the Zacks Rank reflects the expected return of an ETF relative to other products with a similar level of risk.
For investors seeking to apply this methodology to their portfolio in the Latin American market, we have taken a closer look at the top ranked LATM below:
Market Vectors Latin America Small-Cap ETF (LATM)
Market Vectors Latin America Small-Cap ETF provides exposure to the small cap equities of the emerging market of Latin America and tracks the Market Vectors Latin America Small-Cap Index. The fund holds a total of 157 small cap stocks and has a total asset base of $13.3 million of which 21.1% is invested in the top 10 holdings.
So, the fund appears to be diversified with assets spread among other companies beyond the list of top 10. Among the different sectors, materials and consumer discretionary occupy the top two positions with 50.4% of investment made in these two categories (Time for the Latin America Small Cap ETF?).
Market Vectors Latin America Small-Cap ETF charges a fee of 63 basis points for the investment. Small cap companies are more volatile than their large cap counterparts and may prove to be weaker than large cap companies at times of global crisis.
Among country exposure, Brazil enjoys the maximum allocation with Canada, Mexico and Chile also getting double-digit allocations in the fund.
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