BRICS exchange-traded funds (ETFs) offe🧸r investors the chance to invest in emerging markets. Investing in a single fund provides convenient access to stocks and bonds from these countries.

While there is a high degree of interest in BRICS ETFs as an investment because of these countries' high economic growth, they are expected to experience heightened volatility and uncertainty compared to developed markets.

So are they worth it? That depends on you, your financial situation, and your goals. Keep reading to learn more about BRICS ETFs and more pros and cons of investing in these securities.

History of BRICs ETFs

The BRIC acronym was coined by economist Jim O'Neill in 2001 in a research paper. He used the term to describe Brazil, Russia, India, and China—four emerging market countries with the biggest economic growth potential. In 2010, BRIC added South Africa, becoming BRICS and five more countries joined the alliance in 2024: Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE.

After Russia invaded Ukraine in 2022, many BRICS indexes dropped Russia from their portfolios, and Russia-specific ETFs were delisted from American exchanges. The expansion marks a push by some BRICS members to balance out a U.S.-dominated world economy.

The first BRIC ETF was launched in November 2007: the iShares MSCI BRIC ETF. Russia was reclassified from MSCI's ETFs and indexes in 2022.

Pros and Cons of Investing in BRICS ETFs

Pros of Investing in BRICS ETFs

Higher Potential Returns

The higher projected 澳洲幸运5官方开奖结果体彩网:gross domestic product (GDP) growth of BRICS economies compared to 澳洲幸运5官方开奖结果体彩网:developed markets suggests a strong return꧑ potential fo🍌r BRICS ETFs. Investing early in these emerging markets as they expand could supply higher long-term returns.

Growth projections are driven by increased industrialization, urbanization, and consumer demand within these economies. The 2024 additions to BRICS mean it covers not only about 3.5 billion people and many consumers but also about 42% of global 澳洲幸运5官方开奖结果体彩网:crude oil output.

As these countries develop, companies within these markets could see significant gains in revenues and profits, translating to higher stoc🌌k prices and greater returns for investors in BRICS ETFs.

BRICS countries tend to have younger populations and a growing middle class. This could lead to higher domestic consumption and a growing demand for various products and services from both domesti𝔍c and foreign producers.

Geographic Diversification

BRICS ETFs offer 澳洲幸运5官方开奖结果体彩网:diversification through exposure to different emerging markets in a single fund. This can help balance an investment 澳洲幸运5官方开奖结果体彩网:portfolio heavily weighted in U.S. and European stocks and bonds.

The diversification of BRICS ETFs can help achieve a more balanced portfolio and enhance returns while mitigating risks compared with investing only in developed markets. For example, e🐭merging economies may grow when developed markets like the United States or Western Europe stagnate.

Emerging Market Exposure

BRICS ETFs offer some of the easiest and most direct exposure to emerging markets. Most of these countries are significant actors on different continents. Not only do they provide geographical diversification, but they also offer broader e🔜merging market exposure. They also have major oil reserves and other significant raw materials exports important for the world economy.

Convenient

Investing in individual stocks in these countries would require a deep understanding of each market, including local economic conditions, regulations, and market dynamics. ETFs streamline the process, providing a single investment vehicle encompassing stocks across each country. By buying shares in a BRICS ETF, investors thus gain exposure to a basket of stocks spread across different sectors and regions in a single transaction.

Because they trade like shares, ETFs are liquid securities that can be bought and sold throughout the trading day, with many brokerages today offering commission-free trading in most ETFs.

Cost-Effective

Direct investment in international markets (such as opening a foreign brokerage account) also often involves higher transaction costs 🍷and minimum investment thresholds, which can be prohibitive for individual investors.

BRICS ETFs typically have lower transaction costs than direct international investments, allowing inve൲stors to gain exposure to these markets with relatively small in꧂vestment amounts.

Cons of Investing in BRICS ETFs

Higher Volatility and Risk

Emerging markets tend to experience larger price swings. Therefore, a primary concern with BRICS ETFs is their potential for higher 澳洲幸运5官方开奖结果体彩网:volatility than developed market investments.

澳洲幸运5官方开奖结果体彩网:Stock markets in the BRICS countries can experience sudden fluctuations because of various factors, including economic uncertainty, political instability, trade disruptions, and global market dynamics. This could lead to significant short-term swings๊ in BRICS ETF values, which could unsettle ris🤡k-averse investors.

For example, some BRICS economies, like Brazil, Saudi Arabia, and the UAE, rely heavily on commodity prices. This means that the performance of ETFs invested in these countries can be disproportionately affected by global 澳洲幸运5官方开奖结果体彩网:commodity market fluctuations and geopolitical events, ad𒅌ding other layers of risk.

Political, Regulatory, and Economic Uncertainty

The political and economic environments in the BRICS countries can be less stable than in more developed economies. Changes 𝔍in government policie𒉰s, regulations, and political unrest can significantly impact these markets.

For instance, armed conflict or 澳洲幸运5官方开奖结果体彩网:sanctions have affected Russia, while regulatory changes can significantly impact China. Such instabilities can directly affect the performance of companies within BRICS Eᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚTFs.

Regulatory environments in the BRICS countries can also be less robust than in developed markets, leading to concerns about corporate governance and 澳洲幸运5官方开奖结果体彩网:transparency. This can make it more🐼 difficult for investors to accurately assess the risks and prospects of the companies within the ETFಞ.

Currency Risk

When investing in BRICS ETFs, investors are also exposed to 澳洲幸运5官方开奖结果体彩网:currency risk. Fluctuations in the value of these countries’ currencies against the investor’s home currenc🤡y can affect returns from these ETFs.

When those currencies weaken vs. the U.S. dollar, it negatively affects the relative performance of those holdings. The fact that the BRICS countries have experienced periods of high 澳洲幸运5官方开奖结果体彩网:inflation in the past also dampened currency values.

Currency risk adds an extra layer of complexity and can either enhance or erode investment returns, depending on currency movements.

Factors to Consid꧟er When Investing in BRICs ETFs

When researching BRICS ETFs, review their holdings, 澳洲幸运5官方开奖结果体彩网:expense ratios, liquidity, 澳洲幸运5官方开奖结果体彩网:assets under management (AUM), and 澳洲幸运5官方开奖结果体彩网:historical returns and compare them with each other and 澳洲幸运5官方开奖结果体彩网:benchmarks. Higher expense ratios,൩ for example,♔ can erode net returns, all else being equal.

Comparing several BRICs ETFs can help identify a suitable fund for your portfolio and 澳洲幸运5官方开奖结果体彩网:risk tolerance.

It’s also important to diversify your exposure or pair BRICS ETFs with other emerging market ETFs rather than concentrate your exposure in the 🌃BRICS countries. Broader emerging mark෴et ETFs could provide more balanced exposure.

Other Emerging Market ETFs

In addition to ETFs that track stocks in the BRICS countries, there are other emerging ಌmarkets funds to consider. The following are a few ETFs that have broad-based emerging markets exposure, with BRICS among those from several other countries:

• Vanguard FTSE Emerging Markets ETF (VWO)
• iShares MSCI Emerging Markets ETF (EEM)
• SPDR Portfolio Emerging Markets ETF (SPEM)
• Schwab Emerging Markets Equity ETF (SCHE)

Individual 💜country ETFs, like those for Indonesia, Mexico, Poland, Thailand, Turkey, an💜d Saudi Arabia, among others, also have emerging market exposure.

Top BRICS ETFs

Note that two Russia-focused ETFs, RSX and ERUS, were delisted following Russia’s invasion of Ukraine in 2022.

The Bottom Line

The key advantages of BRICS ETFs are diversification, access to fast-growing economies, and the possibility of generating higher long-term returns than develope꧙d markets. However, there are also 🎉greater risks involved. Volatility tends to be higher because of political instability, slower growth, and currency fluctuations. Also, the BRICS countries face challenges with corruption, infrastructure gaps, and economic reforms.

For investors with high risk tolerance, a small allocation to BRICS ETFs can provide 𓂃portfolio growth poಞtential. But limit exposure to 5% to 10% of the total portfolio value. Emerging markets should be balanced with holdings in stable developed markets.

Always conduct thorough research before selecting a specific BRICS ETF. Compare expenses, liquidity, holdings, and historical performance against other funds and benchmarks. Diversify across several emerging market ETFs rather than concentrating solely💜 in the BRICS countries.