Thanks! I understand the benefits of simplicity too, and that would favour just having one ETF. It’s super helpful as I try to figure out how to move forward with getting started investing. O are are you referring to the number of individual stocks within the international and emerging markets equity ETFs? Of course, when it comes to investing, you don’t have to limit yourself to developed countries. However, MSCI currently only includes about 234 large cap China A share companies, while FTSE includes around 1,915 large-, mid- and small-cap China A share companies. EEM tracks the performance of over 1,000 large and mid-size companies located in 24 emerging countries around the world. Given that South Korea is the 11th largest economy (it's ranked abo… https://www.blackrock.com/ca/individual/en/products/251423/ishares-msci-emerging-markets-imi-index-etf. Plus, the country classifications are in a constant state of flux. Don't subscribe • MSCI classifies Poland as an emerging market, so includes about 37 Polish companies in the MSCI Emerging Markets IMI Index. @BartBandy: Theoretically, yes, if ZEM held all the individual emerging markets stocks directly, it should be more tax-efficient in an RRSP than XEC from a foreign withholding tax perspective (although they’re not perfect comparisons). This matters to me because in my particular financial situation, having funds in an RRSP doesn’t make sense so I’m working with only the TFSA, RDSP (similar tax treatment as the TFSA for foreign tax) and taxable accounts. Even with this relatively large difference in country holdings, the ETFs’ underlying indices have had similar performance between 2006–2018. Sources: BlackRock Asset Management Canada Limited, BlackRock Inc., MSCI, as of December 31, 2018. The corresponding numbers for XEC are 5.69% and 6.09%. EMQQ is an emerging markets sector ETF (internet and ecommerce companies), so it is not as diversified as the emerging markets equity ETFs in my model ETF portfolios (which include emerging markets companies across many industries/sectors). Thanks Justin for the video on Emerging Markets. It’s called the MSCI Emerging Markets IMI Index. That’s a positive development and hopefully it gets Blackrock and Vanguard moving in the same direction. I don’t pretend to understand it all, but there’s a lot of useful data in the financial statement. All 3 are fine. In 2005, Vanguard U.S. released the Vanguard FTSE Emerging Markets ETF (VWO). I think there is the suggestion in the website of direct investing playing a greater role in the future. @Diane: The CPM model ETF portfolios generally include 1 U.S. equity ETF, 1 international equity ETF, and 1 emerging markets equity ETF. As you may have already pieced together, there also is a single index that follows a combination of the MSCI Emerging Markets Index and the MSCI Emerging Markets Small Cap Index. Fine.

Replies to my comments @Tyler: Correct – the majority of return differences are due to currency fluctuations. • Both MSCI and FTSE include a portion of China A shares within their emerging markets indices. I commend you for providing both to your followers. Those are for the 5 year period ending Nov 30, except for ZEM, where it’s Nov 29. Is it correct that you would still recommend XEC in this situation?

If you consider thought to be valid and important, is there a specific threshold (percentage of unrealized capital gains, or absolute dollar amount) that would make you think using a (virtually identical) ETF from another company.

I usually enjoy reading more than watching a video (although my future videos will likely become more and more complex, so the video tutorial style may be easier for viewers to digest). There’s no reason EEM should cost more than IEMG and roughly 1600 reasons it should cost less. Thank you for the article. I was looking at FM, which has outperformed all of those over a longer time period, but not as well over the past few years and has much higher expenses. I particularly like how you talk about taxes. As discussed in earlier installments, “FTSE” stands for “Financial Times Stock Exchange”, and “All Cap” indicates that the index tracks large, mid-cap, and small-cap companies. The methodology can be found here: https://www.wisdomtree.com/-/media/us-media-files/documents/resource-library/pdf/research/methodologies/core-equity-index-methodology.pdf. VWO charges just 0.12% per year while IEMG charges 0.14%. In 2011, Vanguard Canada launched a Canadian-version of VWO, the Vanguard FTSE Emerging Markets All Cap Index ETF (VEE). IEMG and XEC should have similar performance, if you convert IEMG’s returns (which are quoted in U.S. dollars) to Canadian dollars. At least at the moment, here are some of the variations on the theme: • MSCI classifies Korea as an emerging market, so includes about 422 Korean companies in the MSCI Emerging Markets IMI Index. IEMG, EEM's low-cost alternative, also charges 0.14% per year and is one of this year's top asset-gathering ETFs.

Each company in the MSCI Emerging Markets Index is weighted according to its “float-adjusted” market capitalization. However, ZEM tends to hold a chunk in EEM and INDA throughout the year, so it would be difficult to calculate an estimate of the tax drag.

The corresponding numbers for ZEM are 5.78% and 6.32%. Hopefully one day they can do an ETF that holds the stocks directly! For more information on float-adjusted market caps, please watch my video, Understanding Canadian Equity ETFs. I can confirm that VEE still just holds the U.S.-listed Vanguard ETF, VWO. For more information on foreign withholding taxes, please refer to our white paper on the subject, but here’s a quick overview of their expected impact. There are a number of notable differences between the MSCI and FTSE emerging markets indices. This extra tax drag is due to the additional 15% U.S. withholding taxes that apply on foreign dividends paid to Canadian investors from the underlying U.S. fund. I know that for Emerging Markets and Developed International Markets that the different ETF providers track different indices which can put different countries into Developed vs Emerging markets, and this is important to note. Has there been a change since you did this video/post? If this investor was rebalancing largely by addition, they might not have added a lot to their US ETF(s) for several years, but then in 2018 they might have added a bunch to their US holdings. XEM follows the same index, but trades in Canadian dollars on the Canadian stock exchange. So you can literally invest in just Latin America or New Zealand or Poland or even obscure markets like small cap India, Brazil, Philippines, Columbia, Qatar, UAE, China, etc funds.

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