What VWO actually is

VWO is Vanguard’s ETF for emerging-market stocks. It tracks the FTSE Emerging Markets All Cap China A Inclusion Index, which measures the investment return of stocks issued by companies located in emerging markets. The fund invests by sampling the index, holding a broadly diversified collection of securities that approximates its key characteristics.

It launched in 2005.

What is inside

A broad set of companies in countries such as China, India, Taiwan, Brazil and South Africa, across technology, financials, consumer and industrial sectors. China is usually the largest single country weight.

Distributions

Emerging-market companies often pay dividends, but amounts vary a lot from year to year and from country to country. Foreign dividends can face withholding tax. Check the fund’s current yield, fees and distribution schedule on the issuer’s website, because they change.

What to keep in mind

  • Political and regulatory risk. Rules can change quickly.
  • Currency swings. Local currencies can fall against the dollar.
  • Country concentration. A few countries make up a large share.
  • Volatility. Prices move more than in developed markets.

Quick take

VWO adds growth potential and diversification from emerging economies, with higher risk than developed-market funds. It is usually a small slice of a portfolio, not a core income holding.