Want to start investing in Mexico? These five ETFs may be a good place to begin.
Is investing in Mexico a good idea? Since Donald Trump won the US presidential election last year, there’s been some trepidation about what his policies could mean for the country.
So far, however, Mexico doesn’t seem to be suffering. Q1 GDP data reveals that the country’s economy grew by 0.6 percent during the period, and overall Mexico currently has the second-largest economy in Latin America.
For those and other reasons, some market participants want to start investing in Mexico. There are many ways to do so, but investors looking for a relatively easy place to start may want to consider Mexico-focused ETFs. ETFs, or exchange-traded funds, are marketable securities that track an index, a commodity, bonds or a basket of assets like an index fund. Unlike mutual funds, they trade like regular stocks on a stock exchange; they also generally have higher daily liquidity and lower fees than mutual funds.
The list below outlines the five top Mexico-focused ETFs by total asset value. It was current as of May 5, 2017 and was generated by ETFdb.com. For those looking to start investing in Mexico, these ETFs may be a good starting point.
1. iShares MSCI Mexico Capped ETF (ARCA:EWW)
Total assets: $1,213,572
Current price: $51.41; year-to-date gain: 16.92 percent
The iShares MSCI Mexico Capped ETF aims to track the investment results of a broad-based index composed of Mexican equities. It is a higher-risk, higher-reward investment whose top holdings by percentage are America Movil (NYSE:AMX), Fomento Economico Mexicano (NYSE:FMX) and GPO Finance Banorte (BMV:GFNORTEO).
This ETF is the unhedged version of the iShares Currency Hedged MSCI Mexico ETF (ARCA:HEWW), mentioned below. The two can be combined in order to “tailor currency risk while maintaining consistent equity exposure.” Combining the iShares MSCI Mexico Capped ETF and iShares Currency Hedged MSCI Mexico ETF can also help “[l]everage the scale of EWW which may help minimize trading costs.”
2. Ultra MSCI Mexico Capped IMI ETF (ARCA:UMX)
Total assets: $7,997.50
Current price: $22.73; year-to-date return: 30.26 percent
The Ultra MSCI Mexico Capped IMI ETF seeks daily investment results, before fees and expenses, that correspond to two times the daily performance of the MSCI Mexico IMI 25/50 Index. That index is a free float-adjusted, market cap-weighted index designed to measure the equity market performance of the Mexican market by capturing 99 percent of the (publicly available) total market cap.
This ETF is designed for investors seeking magnified exposure to the index. Common uses for magnified exposure include: seeking magnified gains, getting a target level of exposure for less cash and overweighting a market segment without additional cash.
3. iShares Currency Hedged MSCI Mexico ETF
Total assets: $3,159.74
Current price: $21.38; year-to-date return: 4.74 percent
The goal of the iShares Currency Hedged MSCI Mexico ETF is to track the investment results of an index composed of large-, mid- and small-cap Mexican equities, while mitigating exposure to fluctuations between the value of the peso and the US dollar. As discussed, the iShares MSCI Mexico Capped ETF is the unhedged version of this ETF, and investors may be able to benefit from combining the two.
4. Deutsche X-trackers MSCI Mexico Hedged Equity ETF (ARCA:DBMX)
Total assets: $3,096.37
Current price: $20.95; year-to-date return: 7.68 percent
The Deutsche X-trackers MSCI Mexico Hedged Equity ETF seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI Mexico IMI 25/50 US Dollar Hedged Index. The aim of that index is to give investors exposure to the Mexican equity markets while mitigating exposure to fluctuations between the value of the US dollar and the peso.
Currently the three top sectors that the ETF’s fund are allocated to are: consumer staples (25.17 percent), materials (16.7 percent) and financials (15.42 percent). Telecommunication services, industrials, consumer discretionary and more all have smaller shares.
5. Ultrashort MSCI Mexico Capped IMI ETF (ARCA:SMK)
Total assets: $999.72
Current price: $20.04; year-to-date return: -27.15 percent
The Ultrashort MSCI Mexico Capped IMI ETF aims for daily investment results, before fees and expenses, that correspond to two times the inverse of the daily performance of the MSCI Mexico IMI 25/50 Index. That index is the same one that the Ultra MSCI Mexico Capped IMI ETF tracks.
Common uses for inverse exposure include: hedging against declines, seeking to profit from declines and underweighting exposure to a market segment.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.