State Street SPDR Portfolio MSCI Global Stock Market ETF (NYSEMKT:SPGM) provides broad, all-cap global exposure, whereas the iShares Core MSCI Emerging Markets ETF (NYSEMKT:IEMG) focuses exclusively on developing economies, with a heavy tilt toward Asian technology.
Choosing between these two depends on whether an investor requires a total world equity solution or a targeted satellite for developing markets. While both offer exceptionally low costs, SPGM captures developed and emerging markets in one package, whereas IEMG serves as a deep dive into growth-heavy developing regions that often see higher price swings.
Snapshot (cost & size)
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
Both funds are highly cost-efficient with identical 0.09% expense ratios. However, income seekers may find the iShares fund more appealing, as its 2.3% distribution yield currently sits 0.48 percentage points higher than its global market counterpart.
Performance & risk comparison
What’s inside
State Street SPDR Portfolio MSCI Global Stock Market ETF provides broad exposure to global equities, spanning both developed and emerging markets. Its largest positions include Nvidia Corp (NASDAQ:NVDA) at 4.33%, Apple Inc (NASDAQ:AAPL) at 4.17%, and Microsoft Corp (NASDAQ:MSFT) at 2.40%. The fund holds 2,927 securities and is primarily allocated to Technology (31%), Financial Services (16%), and Industrials (13%). It was launched in 2012. State Street SPDR Portfolio MSCI Global Stock Market ETF has paid $1.54 per share over the trailing 12 months, which, at its recent ~$84 share price, yields 1.8%.
iShares Core MSCI Emerging Markets ETF tracks a diverse portfolio of stocks across developing global economies. Its top holdings include Taiwan Semiconductor Manufacturing (TWSE:2330) at 13.50%, Samsung Electronics Ltd (KOSE:A005930) at 6.08%, and Sk Hynix Inc (KOSE:A000660) at 5.04%. It holds 2,826 securities with heavy concentrations in Technology (44%), Financial Services (17%), and Consumer Cyclical (8%). It was launched in 2012. iShares Core MSCI Emerging Markets ETF has paid $1.80 per share over the trailing 12 months, which, at its recent ~$78 share price, yields 2.3%.
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Which is the better buy
The State Street SPDR Portfolio MSCI Global Stock Market ETF (SPGM) and the iShares Core MSCI Emerging Markets ETF (IEMG) are both global exchange-traded funds (ETFs), but that’s where the similarities end. In truth, these two funds are quite different, and it’s important for investors considering them to understand how much they diverge in holdings and overall strategy. Let’s take a closer look at each one.
We’ll begin with SPGM. This is a global ETF, but much of the fund’s holdings are actually American stocks. Indeed, over 60% of its holdings are U.S.-based stocks, meaning that the fund’s performance will still largely correlate to the major U.S. stock market averages. Megacap stocks like Apple, Nvidia, and Microsoft dominate the fund’s top holdings. As for performance, the fund has delivered a total return of 220% over the last 10 years, with a compound annual growth rate (CAGR) of 12.3%. That’s a solid return, but it lags the S&P 500, which has delivered a total return of 300% and a CAGR of 14.9% over the same period. SPGM has a very manageable expense ratio of 0.09% and a dividend yield of 1.8%.
Next, there’s IEMG. Unlike its counterpart, IEMG is focused on emerging markets. As a result, this fund’s exposure tilts heavily toward Asia Pacific (81% of total holdings), with Europe (11%) and the Americas (8%) providing much smaller portions of its portfolio. Taiwan (28%) is the country with the most exposure in the fund, followed by South Korea (19%) and China (18%). The fund also tilts heavily towards the tech sector (37%), with financials (21%) and Industrials (2%) rounding out its top three sectors. As for performance, the fund has delivered a total return of 132%, with a CAGR of 8.8% over the last 10 years. That lags both the S&P 500 and SPGM. Lastly, its expense ratio of 0.09 is quite affordable, and its dividend yield of 2.3% is solid.
In summary, SPGM is a fund designed to provide global exposure — with a heavy tilt towards American stocks. IEMG, on the other hand, is designed to provide diversification with virtually no exposure to U.S. markets — even though many of the stocks it holds still rely on a healthy U.S. economy. Investors should take note — SPGM is designed to act as a fully diversified portfolio in miniature, while IEMG is designed to serve as one component of a larger portfolio.
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Jake Lerch has positions in Nvidia. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
Global Markets (SPGM) or Emerging Growth (IEMG)? Which Fund is the Right Choice? was originally published by The Motley Fool
