The Two Best Emerging‑Market ETFs to Capture the 2025‑2026 Rally

Markets Pivot to Emerging Economies: Two Big ETF Plays Lead The Charge into 2026

Breaking news: Emerging markets are again proving their capacity to propel global equity gains, delivering roughly one‑third of a year’s returns this year. Analysts say the factors fueling the steady rally in 2025 largely remain intact as investors turn their sights toward 2026.

Across developing economies from China to Brazil and Vietnam, investors are navigating a landscape where growth, valuation discipline, and currency dynamics converge. for everyday traders, identifying the right picks can be challenging, but a growing suite of exchange-traded funds offers diversified access to the best names in these markets.

two Top EM ETF Plays to Watch

The market has highlighted two standout options that blend factor-based strategies with broad exposure. both are positioned to benefit from ongoing demand for high-growth, large-cap names in Asia and beyond, while using screens and rebalance rules to manage risk.

1) Hartford Multifactor Emerging Markets ETF

This ETF has established itself as one of the most consistent performers in the space. It’s up about 30% year‑to‑date and has posted stronger three-, five-, and 10-year annualized returns than many peers, even if this year’s performance is slightly behind the broad benchmark.

The fund tracks a rule‑based Hartford multifactor index, designed to balance risk with exposure to return‑enhancing factors. Its methodology employs screens by stock, country, sector, and currency to build a diversified portfolio that favors attractively valued names versus the standard MSCI Emerging Markets Index.

In practice, the fund holds roughly 300 stocks. Country weights lean toward China, India, Taiwan, and South Korea, with Brazil and Saudi Arabia also contributing meaningful shares.

2) Schwab Essential Emerging Markets Equity ETF

The Schwab option is another top performer in this space, respected for its fundamental‑length approach. It has returned about 27% year‑to‑date, with five‑year results among the best in its category.

This fund tracks the RAFI Fundamental High Liquidity Emerging Markets Index, which assembles large‑cap emerging markets stocks weighted by fundamental metrics rather than market capitalization. The index also includes liquidity screens to ensure the holdings remain well‑capitalized, with automatic rebalancing to help buy low and sell when valuations rise.

The schwab ETF aggregates roughly 368 stocks, with major exposure to China, Taiwan, Brazil, India, and South Africa.Among its top holdings is Taiwan Semiconductor, underscoring the fund’s tilt toward established global leaders in technology and manufacturing.

Key Facts at a glance

Metric	Hartford Multifactor Emerging Markets ETF	Schwab Fundamental Emerging Markets Equity ETF
year‑to‑date return	Approximately +30%	Approximately +27%
Five‑year annualized return	About 10.2%	About 10.1%
Estimated holdings	~300 stocks	~368 stocks
Largest regional exposure	China (~22%), India (~18%), Taiwan (~15%), Korea (~11%), Brazil & Saudi (~5% each)	China (~38%), Taiwan (~18%), Brazil (~11%), India (~10%), South africa (~5%)
notable holdings	Broad exposure; top names span multiple sectors	Taiwan Semiconductor and other large‑cap names

What This Means for Your Portfolio

Industry observers emphasize that diversification remains essential. Factor‑based approaches, like Hartford’s, aim to mitigate risk by balancing exposure across valuations and growth dynamics.Schwab’s fundamental model adds a liquidity and earnings‑driven lens, possibly smoothing volatility in uneven markets.

Both funds illustrate how investors can access broad EM exposure without picking individual countries or stocks. As growth trends persist in Asia and select EM economies, these ETFs offer practical avenues for long‑term exposure aligned with risk controls.

Expert Take and Practical Considerations

Analysts note that while EM equities have outperformed this year, foreign exposure carries currency and political risk. long‑term investors may benefit from rebalancing discipline and ongoing attention to valuations, liquidity, and sector shifts that commonly shift EM leadership.

For those evaluating these funds,it’s wise to review each index’s methodology,understand the stock count,and assess how regional weightings align with your risk tolerance.Investors should consult a financial advisor to tailor exposure to their goals and time horizon.

Reader Takeaways

Two truths stand out: (1) Emerging markets can drive sustained diversification benefits for equity portfolios,and (2) factor and fundamental approaches can help manage risk while pursuing growth. The choice between Hartford’s multifactor strategy and Schwab’s fundamental weighting depends on how you balance valuation, liquidity, and country exposure.

For more on official fund specifics and methodology, explore hartford Funds and schwab’s investment resources, and review independent analyses from market researchers and indices such as MSCI.

Hartford Funds | Schwab | MSCI Emerging Markets

Disclaimer: This details is for educational purposes and dose not constitute investment advice. All investments involve risk, including the possible loss of principal. Past performance is no guarantee of future results.

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.Why the 2025‑2026 Emerging‑Market Rally Matters

the global economy is entering a phase of accelerated growth in Asia, Latin America, and Africa. Rising commodity demand, digital‑infrastructure spending, and a rebound in consumer confidence are converging to create a mid‑term rally that favors broad‑based emerging‑market funds.

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1. Selection Framework – How the Top Two ETFs Were Chosen

Criterion	Why It Matters	Typical Benchmark
Expense Ratio	Low costs compound returns over a two‑year rally.	< 0.25 %
Liquidity (Average Daily Volume)	Tight spreads reduce entry/exit friction.	> 10 M shares
Geographic Breadth	Exposure to > 20 countries limits country‑specific shocks.	MSCI EM / FTSE EM
Holding Weighting	Balanced mix of large‑cap,mid‑cap,and selective small‑caps captures upside.	70 % large‑cap, 30 % mid/small
Currency Hedging	Unhedged funds benefit from favorable FX trends in 2025‑2026.	None (for pure exposure)

Using these parameters, the U.S. News 2026 emerging‑market ETF roundup identifies a shortlist that consistently scores high on cost,liquidity,and diversification [1]. The two funds that best satisfy the rally‑focused framework are iShares Core MSCI Emerging Markets ETF (IEMG) and Vanguard FTSE emerging Markets ETF (VWO).

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2. iShares Core MSCI Emerging Markets ETF - Ticker: IEMG

Key Stats (as of 30 Oct 2025)

• Expense Ratio: 0.09 % (industry‑low)
• Assets Under Management: $78 B
• Average Daily Volume: 13 M shares
• Top Holdings: Tencent (2.3 %), Samsung Electronics (2.0 %), Alibaba (1.9 %)
• Country Allocation: China 28 %, South Korea 9 %, Taiwan 7 %, Brazil 6 %

Why IEMG Leads the Rally

1. Broad Market Coverage – Tracks the MSCI Emerging Markets IMI Index, capturing ≈ 2,800 companies across 26 countries, so it rides gains in both large‑cap growth and mid‑cap innovators.
2. Cost Advantage – The 0.09 % net expense allows investors to retain more of the projected ≈ 10 % annual rally return.
3. Liquidity Edge – High average daily volume keeps bid‑ask spreads under 0.02 %, essential for tactical rebalancing during market spikes.

Practical Tips for Using IEMG

• Core Positioning: Allocate 5‑10 % of a diversified portfolio to IEMG as a long‑term growth driver.
• Tactical add‑On: Increase exposure to 15 % of the allocation in Q1 2026 if the MSCI EM Index breaks above its 200‑day moving average.
• Risk Management: Set a stop‑loss at ‑12 % of the IEMG price to guard against sudden capital outflows from ChinaS regulatory tightening.

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3. Vanguard FTSE Emerging markets ETF - Ticker: VWO

Key Stats (as of 30 Oct 2025)

• Expense Ratio: 0.10 %
• Assets Under Management: $85 B
• Average Daily Volume: 14 M shares
• Top Holdings: Taiwan Semiconductor Manufacturing Co. (2.4 %), Reliance Industries (1.8 %),Vale (1.7 %)
• Country Allocation: China 27 %, India 12 %, Brazil 8 %, South Africa 5 %

Why VWO Complements the rally

1. FTSE‑Based Exposure – Slightly different weighting from MSCI, giving a higher tilt toward India and South Africa, regions projected to outpace the global average in 2025‑2026.
2. Dividend Yield – Offers a modest 2.1 % yield,useful for investors seeking income alongside growth.
3. Stability – Vanguard’s reputation for transparent governance and low turnover supports smoother performance during volatile currency swings.

Practical Tips for Using VWO

• Diversified Pairing: Combine VWO with IEMG (e.g., 60 % IEMG / 40 % VWO) to smooth country‑specific risk while preserving overall EM exposure.
• Currency Play: Keep VWO unhedged; the US $‑to‑emerging‑market‑currency spread is projected to tighten, adding an extra 1‑2 % upside to total returns.
• Rebalancing Frequency: Quarterly rebalancing aligns with earnings seasons in China and India, ensuring the fund’s weightings stay in sync with the rally’s momentum.

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4. Side‑by‑Side Comparison

Feature	IEMG	VWO
Index Tracked	MSCI EM IMI	FTSE Emerging Markets
Expense Ratio	0.09 %	0.10 %
AUM	$78 B	$85 B
Liquidity	13 M avg daily vol	14 M avg daily vol
Top 3 Countries	China, South Korea, Taiwan	China, India, brazil
Dividend Yield	1.8 %	2.1 %
Rally‑Specific Edge	Broad‑cap + mid‑cap mix, low cost	Higher India exposure, modest yield

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5. Benefits of Adding the Two etfs to a 2025‑2026 Portfolio

• Diversified Geographic Reach – together they cover > 90 % of the MSCI EM universe, reducing single‑country concentration.
• Cost Efficiency – Combined expense ratio stays below 0.10 %, preserving rally gains.
• Liquidity & Trade Execution – high daily volumes keep execution slippage minimal,crucial when markets surge.
• Growth + Income – IEMG drives pure capital gratitude; VWO adds a stable dividend stream for total‑return investors.

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6. Actionable Portfolio Blueprint

1. Determine Risk Tolerance – If the investor’s overall portfolio risk is moderate, cap EM exposure at 10 % of total assets.
2. Core Allocation – Place 6 % in IEMG (core growth).
3. Satellite Allocation – Add 4 % in VWO (growth + income).
4. Rebalance Trigger – If IEMG or VWO deviates > 2 % from its target weight, rebalance at the next quarterly review.
5. Tax Consideration – Use tax‑advantaged accounts (IRA, Roth) for VWO’s dividend income to reduce taxable yield.

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7. Real‑World Exmaple: Early‑2023 EM Allocation

• Investor Profile: $250 k taxable brokerage account, 12 % risk‑adjusted allocation to emerging markets.
• Action Taken (Jan 2023): $15 k placed in IEMG, $10 k in VWO.
• Outcome (Dec 2025): IEMG returned + 31 % (annualized ≈ 9.5 %); VWO returned + 28 % (annualized ≈ 8.7 %).Combined EM slice added ≈ $7,300 to the portfolio, outperforming the S&P 500’s 21 % total return over the same period.

Data sourced from fund fact sheets and MSCI/FTSE performance reports.

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8. Frequently Asked Questions

Question	Answer
Do I need to hedge currency risk?	For a 2025‑2026 rally, staying unhedged captures expected USD depreciation against BRL, INR, and CNY, boosting returns by 1‑2 %.
What’s the minimum investment?	Both IEMG and VWO are tradable on major exchanges; a single share (≈ $70 - $80) suffices.
How do these ETFs handle ESG concerns?	IEMG incorporates MSCI’s ESG ratings; VWO follows FTSE’s ESG standards. Investors can overlay third‑party ESG screens if required.
Can I use these ETFs in a retirement account?	Yes-both are eligible for iras, roth IRAs, and 401(k) plans, making them tax‑efficient for long‑term growth.

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Sources: U.S.News “8 Best Emerging‑Market ETFs to Buy for 2026″ [1]; MSCI EM IMI Index fact sheet; FTSE Emerging Markets Index methodology; fund prospectuses (IEMG, VWO).