Non-Retirement: Foreign Emerging Markets Mutual Fund

Wylie Pick: SSGA Emerging Markets SSEMX

Selecting from mutual funds available through Etrade with no load or transaction fee and an initial $2500 investment or lower minimum and subsequent $100 or lower minimums, when looking for a Diversified Emerging Markets fund, I use the Mutual fund screener to screen out options with 3, 4, or 5 stars and include choices with higher expenses since generally, international funds have higher expenses.

I find three options: Excelsior Emerging Markets UMEMX, Managers Emerging Mkts Equity MEMEX, and SSGA Emerging Markets SSEMX.

Each has outperformed the other two in one of the standard periods used to calculate returns (1 year, 3 year, or 5 year). SSEMX is the only one with a 10 year record (10% average annual return).

I also looked at funds with very high turnover and find Amer Century Emerging Markets Inv TWMIX. It has an astonishing 115% annual turnover. Its one year return is 30%. Compare that to SSEMX at 16.83%.

TWMIX's top holding is an Emerging Markets ETF.

Its third top holding is a company that is the second biggest holding of that ETF.

Gazprom has been creating billionaires in Russia for several years as it is basically the largest 'privatized' company in Russia and is the biggest extractor of natural gas and the third biggest oil company (according to somebody who wrote it in wikipedia... hehe) . Note that Gazprom is listed under the country 'United Kingdom' on these charts. Welcome to the wild world of trying to invest in international businesses in emerging markets. I'm guessing this discrepancy is because shares of Gazprom are traded on the London stock exchange, but I could be wrong.

Regardless, TWMIX has an expense ratio of 1.85% compared to SSEMX at 1.25%. If I wanted to buy an ETF, I would pay $10 for the transaction, not pay some fund manager 1.85% annually to do it for me. And though TWMIX has been on fire recently, it is making up for lost time as it trails SSEMX over 5 years. If you want to chase hot returns, feel free to look into TWMIX. But TWMIX's high expenses and turnover steer me away.

So the other funds I originally pulled up also have expenses 1.75% or higher. MEMEX has a 3 star rating while SSEMX has 4.

And UMEMX has trailed the average Emerging Markets fund recently.

SSEMX with low expenses and a good long term track record looks like the best offering for this portfolio.

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