EEM Offers More Of An Internation Focus on Tech Than IXUS

Both the iShares MSCI Emerging Markets ETF and iShares Core MSCI Total International Stock ETF (NASDAQ:IXUS) offer exposure to non-U.S. equities, but IXUS spans across developed and emerging markets worldwide, while EEM is dedicated solely to large and mid-cap stocks in emerging markets. This comparison examines how each ETF stacks up across cost, performance, risk, portfolio makeup, and trading characteristics.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.

IXUS is more affordable, with a lower expense ratio, and offers a higher dividend yield, which may appeal to cost-conscious investors seeking income.

Performance & risk comparison

What's inside

EEM focuses exclusively on emerging markets, with 1,241 different stocks in its total holdings. Throughout its 22-year existence, the fund has historically tilted heavily towards the tech sector. Its largest positions are Taiwan Semiconductor Manufacturing (2330.TW), ASML Holding N.V. (AMS:ASML), and Samsung (005930.KS).

IXUS, by contrast, casts a wider net across 4,215 holdings from both developed and emerging non-U.S. markets, and its strongest sector allocation is towards financial services. The top three holdings are exactly the same as EEM’s, but with less weight in each of the three, as TSMC holds approximately 3% of IXUS, while the company makes up about 12% of the emerging market fund.

What this means for investors

It could help U.S. investors gain some knowledge of international stocks and overseas markets compared to U.S. stocks, as their price movements can widely differ. Thus, EEM or IXUS may move completely differently from ETFs centered around U.S. stocks.

For example, both funds’ top companies are based in Asia, and stocks throughout those countries’ markets can be more volatile than the U.S. stock market, making the two ETFs more volatile than American investors may be used to.

Investors should also not be fooled by EEM’s higher one-year performance. When you look at the five-year performance of both funds, IXUS has risen approximately 27%, while EEM has risen only 5%. Having over three times as many holdings, more international exposure, and higher diversity within multiple sectors of the stock market, IXUS is more ideal in the long term for investors who do not need exclusive emerging-market exposure.

For more guidance on ETF investing, check out the full guide at this link.

Adé Hennis has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.