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7 Emerging Markets Funds to Diversify Your Portfolio

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Broadly speaking, emerging markets funds are getting slammed this year. The widely followed MSCI Emerging Markets Index, which serves as the benchmark for a slew of active and passive emerging markets funds, is down nearly 15% year-to-date.

The Vanguard FTSE Emerging Markets ETF (NYSEARCA:VWO), the largest emerging markets exchange-traded fund, is down more than 16% this year. Rising U.S. interest rates, the strong dollar and trade spats, particularly the one between the U.S. and China, are among the factors hampering emerging markets funds this year.

Even previously high-flying emerging markets funds are slumping. Funds tracking stocks in Saudi Arabia recently tumbled amid the controversy surrounding journalist Jamal Khashoggi’s death.

“Saudi Arabia, a top crude oil exporter, faces international pressure to provide all the facts about an incident that has raised a global storm and added the threat of sanctions against the kingdom to a list of market concerns,” according to Reuters.

For daring investors or those looking for what could turn out to be good deals, here are some emerging markets funds to consider.

iShares MSCI Mexico ETF (EWW)

iShares MSCI Mexico ETF (EWW) emerging markets funds

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Expense Ratio: 0.49%, or $49 annually per $10,000 invested.

The iShares MSCI Mexico ETF (NYSEARCA:EWW) is the largest emerging markets fund dedicated to stocks in Latin America’s second-largest economy and it is down 4% year-to-date. No, that performance is not anything to brag about, but it is far better than that of the MSCI Emerging Markets Index and a number of single-country emerging markets funds.

Elections have been important factors in several Latin American markets this year, including Mexico. Anti-establishment candidate Andrés Manuel López Obrador (AMLO) won Mexico’s presidential election earlier this year, a result mostly cheered by investors.

“AMLO’s ascent heralds the end of decades of technocratic governments made up of traditional parties that pursued economically conservative policies,” said BlackRock. “A majority in Congress would give AMLO leeway for making significant policy shifts. It could also lead to a steady decline in Mexico’s institutional strength, although we see the central bank’s independence as relatively resilient.”

Unfortunately, much of the post-election shine has worn off EWW as this emerging market fund is down almost 9% in the fourth quarter.

iShares MSCI Taiwan ETF (EWT)

iShares MSCI Taiwan ETF (EWT) emerging markets funds

Source: Shutterstock

Expense Ratio: 0.62%

Like the aforementioned EWW, the iShares MSCI Taiwan ETF (NYSEARCA:EWT) is another emerging markets fund that is performing less poorly than broader developing world benchmarks. EWT is down less than 7% year-to-date.

This emerging markets fund, which is the largest ETF tracking stocks in Taiwan, is often embraced by investors because Taiwan is docile relative to other emerging economies. EWT’s three-year standard deviation of 12.08% is below that of the MSCI Emerging Markets Index.

This emerging markets fund has another trait conservative investors will like: income potential. EWT has a trailing 12-month dividend yield of 2.69% and Taiwan is one of the most dependable markets for dividend growth among emerging economies.

WisdomTree India Earnings Fund (EPI)

WisdomTree India Earnings Fund (EPI) emerging markets funds

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Expense Ratio: 0.84%

One of the major problems confounding emerging markets funds this year is the stronger U.S. dollar, a scenario that is particularly problematic for countries burdened with heavy amounts of dollar-denominated debt. On that basis, India and emerging markets funds, such as the WisdomTree India Earnings Fund (NYSEARCA:EPI), look attractive.

Regarding India’s debt, “There is a positive relation between the debt to GDP ratio and the level of GDP per capita. If you compare around the world with the best economies or emerging market economies, the level of debt in India is lower,” said the International Monetary Fund’s director of fiscal affairs Vitor Gasper.

The $1.35 billion EPI holds about 338 stocks, most of which are large caps. EPI devotes nearly 40% of its combined weight to the financial services and energy sectors.

KraneShares MSCI All China Health Care Index ETF (KURE)

KraneShares MSCI All China Health Care Index ETF (KURE) emerging markets funds

Expense Ratio: 0.82%

Healthcare is one of the best-performing sectors in the U.S. this year, but the sector’s usually defensive reputation is being betrayed in emerging markets, including China. The KraneShares MSCI All China Health Care Index ETF (NYSEARCA:KURE) is proof of those struggles as this emerging markets fund is down nearly 20% since its January debut.

When considering the stout fundamentals underpinning China’s healthcare market, KURE could be an emerging markets fund for investors willing to be patient and those that see value emerging following the ETF’s 2018 struggles.

“China currently has the fastest growing major healthcare market in the world with a five-year compound annual growth rate of 17%, compared to just 4% in the United States, and -2% in Japan,” according to KraneShares. “China is the second largest healthcare market globally with total healthcare expenditure reaching $594 billion in 2015. A number projected to reach $1.1 trillion by 2020.”

ALPS Emerging Sector Dividend Dogs ETF (EDOG)

 ALPS Emerging Sector Dividend Dogs ETF (EDOG) emerging markets funds

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Expense Ratio: 0.60%

The ALPS Emerging Sector Dividend Dogs ETF (NYSEARCA:EDOG) is an emerging markets fund that is positioned as a high-yield value fund. EDOG’s trailing 12-month dividend yield of 4% is about 175 basis points higher than the comparable yield on the MSCI Emerging Markets Index. This emerging market fund employs a different methodology than other emerging markets funds.

EDOG looks to “identify 5 highest yielding securities (based on regular cash dividends) in each of the 10 Global Industry Classification Standard (GICS) sectors as of last trading day of November. The annual reconstitution date is the third Friday in December,” according to ALPS.

EDOG’s underlying index also caps country and sector weights at 10% and individual security weights at 2%. As just two examples, this emerging markets fund is significantly overweight Russian and Turkish equities relative to the MSCI benchmark.

John Hancock Multifactor Emerging Markets ETF (JHEM)

John Hancock Multifactor Emerging Markets ETF (JHEM) emerging markets

Expense Ratio: 0.55%

The John Hancock Multifactor Emerging Markets ETF (NYSEARCA:JHEMis one of the newest emerging markets funds, having debuted just last month, but JHEM’s rooking status should not deter investors from considering the fund.

Among emerging markets funds, some multi-factor ETFs have found success. JHEM could be next. This emerging market fund’s underlying index “screens components based on smaller market capitalizations; lower relative price as defined by price-to-book; and higher profitability as defined by operating income over book,” according to ETF Trends.

Focusing on stocks with quality and value traits could serve JHEM going forward because both of those investment factors historically deliver solid long-term returns. By allocating over 52% of its weight to China, South Korea and Taiwan, this emerging markets fund also tilts toward some of the less volatile developing economies.

Global X China Consumer ETF (CHIQ)

 Global X China Consumer ETF (CHIQ) emerging markets funds

Source: Shutterstock

Expense Ratio: 0.65%

China ETFs of all varieties are among this year’s worst-performing emerging markets funds and the Global X China Consumer ETF (NYSEARCA:CHIQ) has not been immune from that ominous trend. Much of that trend is attributable to the U.S. and China displaying hostility toward one another on the trade front, a scenario bound to plague consumer stocks.

Roughly a third of CHIQ’s weight is allocated to consumer staples stocks, but that has not been enough to insulate this emerging markets fund from selling pressure. With its roughly two-thirds tilt to consumer cyclical names, CHIQ is heavily allocated to Chinese internet stocks, a group that is getting drubbed this year.

On the upside, Chinese internet stocks have previously delivered jaw-dropping performances and with this year’s declines, the group is discounted relative to U.S. rivals.

Todd Shriber owns shares of VWO.

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4 things kids need to know about money

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(NC) Responsible spending includes knowing the difference between wants and needs. Back-to-school season, with added expenses and expectations around spending, is the perfect time to not only build your own budget for the year ahead, but also to introduce your own children to the concept of budgeting.

The experts at Capital One break down four basic things that every child should know about money, along with tips for bringing real-life examples into the conversation.

What money is. There’s no need for a full economic lesson,but knowing that money can be exchanged for goods and services, and that the government backs its value, is a great start.
How to earn money. Once your child understands what money is, use this foundational knowledge to connect the concepts of money and work. Start with the simple concept that people go to work in exchange for an income, and explain how it may take time (and work) to save for that new pair of sneakers or backpack. This can help kids develop patience and alleviate the pressure to purchase new items right away that might not be in your budget.
The many ways to pay. While there is a myriad of methods to pay for something in today’s digital age, you can start by explaining the difference between cash, debit and credit. When teaching your kids about credit, real examples help. For instance, if your child insists on a grocery store treat, offer to buy it for them as long as they pay you back from their allowance in a timely manner. If you need a refresher, tools like Capital One’s Credit Keeper can help you better understand your own credit score and the importance of that score to overall financial health.
How to build and follow a budget. This is where earning, spending, saving and sharing all come together. Build a budget that is realistic based on your income and spending needs and take advantage of banking apps to keep tabs on your spending in real-time. Have your kids think about how they might split their allowance into saving, spending and giving back to help them better understand money management.

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20 Percent Of Americans In Relationships Are Committing Financial Infidelity

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Nearly 30 million Americans are hiding a checking, savings, or credit card account from their spouse or live in partner, according to a new survey from CreditCards.com. That’s roughly 1 in 5 that currently have a live in partner or a spouse.

Around 5 million people — or 3 percent — used to commit “financial infidelity,” but no longer do.

Of all the respondents, millennials were more likely than other age groups to hide financial information from their partner. While 15 percent of older generations hid accounts from their partner, 28 percent of millennials were financially dishonest.

Regionally, Americans living in the South and the West were more likely to financially “cheat” than those living in the Northeast and Midwest.

Insecurity about earning and spending could drive some of this infidelity, according to CreditCards.com industry analyst Ted Rossman.

When it comes to millennials, witnessing divorce could have caused those aged 18-37 to try and squirrel away from Rossman calls a “freedom fund”.

“They’ve got this safety net,” Rossman said. They’re asking: “What if this relationship doesn’t work out?”

As bad as physical infidelity

More than half (55 percent) of those surveyed believed that financial infidelity was just as bad as physically cheating. That’s including some 20 percent who believed that financially cheating was worse.

But despite this, most didn’t find this to be a deal breaker.

Over 80 percent surveyed said they would be upset, but wouldn’t end the relationship. Only 2 percent of those asked would end the relationship if they discovered their spouse or partner was hiding $5,000 or more in credit card debt. That number however is highest among those lower middle class households ($30,000-$49,999 income bracket): Nearly 10 percent would break things off as a result.

Roughly 15 percent said they wouldn’t care at all. Studies do show however that money troubles is the leading cause of stress in a relationship.

That’s why, Rossman says, it’s important to share that information with your partner.

“Talking about money with your spouse isn’t always easy, but it has to be done,” he said. “You can still maintain some privacy over your finances, and even keep separate accounts if you and your spouse agree, but you need to get on the same page regarding your general direction, otherwise your financial union is doomed to fail.”

With credit card rates hovering at an average of 19.24 percent APR, hiding financial information from a partner could be financially devastating.

But, Rossman adds, it’s not just about the economic impact but also the erosion of trust.

“More than the dollars and cents is that trust factor,” he said. “I think losing that trust is so hard to regain. That could be a long lasting wedge.”

Kristin Myers is a reporter at Yahoo Finance. Follow her on Twitter.

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7 Examples Of Terrible Financial Advice We’ve Heard

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Between television, radio, the internet and well-meaning but presumptuous friends and family, we’re inundated with unsolicited advice on a daily basis. And when it comes to money, there’s a ton of terrible advice out there. Even so-called experts can lead us astray sometimes.

Have you been duped? Here are a few examples of the worst money advice advisers, bloggers and other personal finance pros have heard.

1. Carry a balance to increase your credit score.

Ben Luthi, a money and travel writer, said that a friend once told him that his mortgage loan officer advised him to carry a balance on his credit card in order to improve his credit score. In fact, the loan officer recommended keeping the balance at around 50 percent of his credit limit.

“This is the absolute worst financial advice I’ve ever heard for several reasons,” Luthi said. For one, carrying a credit card balance doesn’t have any effect on your credit at all. “What it does do is ensure that you pay a high interest rate on your balance every month, neutralizing any other benefits you might get from the card,” Luthi explained. “Also, keeping a 50 percent credit utilization is a surefire way to hurt your credit score, not help it.”

Some credit experts recommend keeping your balance below 30 percent of the card limit, but even that’s not a hard-and-fast rule. Keeping your balance as low as possible and paying the bill on time each month is how you improve your score.

2. Avoid credit cards ― period.

Credit cards can be a slippery slope for some people; overspending can lead to a cycle of debt that’s tough to escape.

But avoiding credit cards on principle, something personal finance gurus like Dave Ramsey push hard, robs you of all their potential benefits.

“Credit cards are a good tool for building credit and earning rewards,” explained personal finance writer Kim Porter. “Plus, there are lots of ways to avoid debt, like using the card only for monthly bills, paying off the card every month and tracking your spending.”

If you struggle with debt, a credit card is probably not for you. At least not right now. But if you are on top of your finances and want to leverage debt in a strategic way, a credit card can help you do just that.

3. The mortgage you’re approved for is what you can afford.

“The worst financial advice I hear is to buy as much house as you can afford,” said R.J. Weiss, a certified financial planner who founded the blog The Ways to Wealth. He explained that most lenders use the 28/36 rule to determine how much you can afford to borrow: Up to 28 percent of your monthly gross income can go toward your home, as long as the payments don’t exceed 36 percent of your total monthly debt payments. For example, if you had a credit card, student loan and car loan payment that together totaled $640 a month, your mortgage payment should be no more than $360 (36 percent of $1,000 in total debt payments).

“What homeowners don’t realize is this rule was invented by banks to maximize their bottom line ― not the homeowner’s financial well-being,” Weiss said. “Banks have figured out that this is the largest amount of debt one can take on with a reasonable chance of paying it back, even if that means you have to forego saving for retirement, college or short-term goals.”

4. An expensive house is worth it because of the tax write-off.

Scott Vance, owner of taxvanta.com, said a real estate agent told him when he was younger that it made sense to buy a more expensive house because he had the advantage of writing off the mortgage interest on his taxes.

But let’s stop and think about that for a moment. A deduction simply decreases your taxable income ― it’s not a dollar-for-dollar reduction of your tax bill. So committing to a larger mortgage payment to take a bigger tax deduction still means paying more in the long run. And if that high mortgage payment compromises your ability to keep up on other bills or save money, it’s definitely not worth it.

“Now, as a financial planner focusing on taxes, I see the folly in such advice,” he said, noting that he always advises his client to consider the source of advice before following it. ”Taking tax advice from a Realtor is … like taking medical procedure advice from your hairdresser.”

5. You need a six-month emergency fund.

One thing is true: You need an emergency fund. But when it comes to how much you should save in that fund, it’s different for each person. There’s no cookie-cutter answer that applies to everyone. And yet many experts claim that six months’ worth of expenses is exactly how much you should have socked away in a savings account.

“I work with a lot of Hollywood actors, and six months won’t cut it for these folks,” said Eric D. Matthews, CEO and wealth adviser at EDM Capital. “I also work with executives in the same industry where six months is overkill. You need to strike a balance for your work, industry and craft.”

If you have too little saved, a major financial blow can leave you in debt regardless. And if you set aside too much, you lose returns by leaving the money in a liquid, low-interest savings account. “The generic six months is a nice catch-all, but nowhere near the specific need of the individual’s unique situation… and aren’t we all unique?”

6. You should accept your entire student loan package.

Aside from a house, a college education is often one of the biggest purchases people make in their lifetimes. Often loans are needed to bridge the gap between college savings and that final tuition bill. But just because you’re offered a certain amount doesn’t mean you need to take it all.

“The worst financial advice I received was that I had to accept my entire student loan package and that I had no other options,” said Gina Zakaria, founder of The Frugal Convert. “It cost me a lot in student loan debt. Now I tell everyone that you never have to accept any part of a college financial package that you don’t want to accept.” There are always other options, she said.

7. Only invest in what you know.

Even the great Warren Buffett, considered by many to be the best investor of all time, gets it wrong sometimes. One of his most famous pieces of advice is to only invest in what you know, but that might not be the right guidance for the average investor.

In theory, it makes sense. After all, you don’t want to tie up your money in overly complicated investments you don’t understand. The problem is, most of us are not business experts, and it’s nearly impossible to have deep knowledge of hundreds of securities. “Diversification is key to a good portfolio, and investing in what you know leads to a very un-diversified portfolio,” said Britton Gregory, a certified financial planner and principal of Seaborn Financial. “Instead, invest in a well-diversified portfolio that includes many companies, even ones you’ve never heard of.”

That might mean enlisting the help of a professional, so make sure it’s one who has your best interests at heart.

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