Better iShares International ETF: ACWX vs. IEMG

The iShares Core MSCI Emerging Markets ETF (NYSEMKT:IEMG) charges a lower expense ratio and focuses on emerging markets, while the iShares MSCI ACWI ex US ETF (NASDAQ:ACWX) provides broader non-U.S. exposure with a slightly higher yield and less risk over recent periods.

IEMG and ACWX both offer international equity exposure, but their approaches differ. IEMG targets only emerging markets across all market caps, while ACWX holds large- and mid-cap non-U.S. stocks. This comparison explores how these differences play out in cost, returns, risk, and composition.

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.

IEMG comes in as the more affordable option with a much lower expense ratio, while ACWX offers a modestly higher dividend yield for those seeking income alongside international diversification.

Performance & risk comparison

What's inside

ACWX holds 1,751 stocks spanning developed and emerging markets, excluding the U.S. and Canada, with a sector mix led by Financial Services at 25%, followed by Technology and Industrials at 15% each. The largest positions are Taiwan Semiconductor Manufacturing at 3.83%, Tencent Holdings Ltd at 1.48%, and ASML Holding Nv at 1.33%. The fund has been around for 17.8 years, offering broad, diversified international exposure without any notable quirks or overlays.

By contrast, IEMG focuses exclusively on emerging markets and is significantly larger, holding 2,725 stocks. Its sector tilt favors Technology at 26%, Financial Services at 21%, and Consumer Cyclical at 12%. Top holdings include Taiwan Semiconductor Manufacturing at 10.73%, Tencent Holdings Ltd at 4.14%, and Samsung Electronics Ltd at 3.70%, resulting in greater concentration among the largest emerging-market companies.

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What this means for investors

Although the iShares Core MSCI Emerging Markets ETF (IEMG) and the iShares MSCI ACWI ex US ETF (ACWX) both include international markets, their different approaches warrant consideration.

ACWX has a broader focus than IEMG, encompassing both developed and emerging markets outside the U.S. and Canada. That’s why one of its biggest holdings is ASML, a Dutch company. Since the ETF includes developed markets, it tends to hold less risk than IEMG, as demonstrated by its lower max drawdown. It’s a large fund sporting good liquidity. However, that lower risk comes with higher fees.

IEMG targets emerging markets specifically, and that comes with a higher risk profile, but also the possibility for more upside than ACWX. Its low cost is an attractive attribute as well. This ETF is for investors who want exposure only to emerging markets for their growth potential, and are willing to take on more risk.

ACWX offers broad exposure to all markets outside the U.S., and is the better choice than IEMG for investors who want to reduce their risk profile with a mix of stable developed and high-growth emerging markets.

Glossary

ETF: Exchange-traded fund that holds a basket of securities and trades like a stock.
Expense ratio: Annual fund fee, expressed as a percentage of assets, deducted from returns.
Dividend yield: Annual dividends paid by a fund divided by its current share price.
Emerging markets: Economies transitioning toward developed status, often with higher growth and higher risk.
Developed markets: Economies with mature financial systems, higher incomes, and more stable regulations.
Non-U.S. exposure: Investments in securities issued by companies outside the United States.
Max drawdown: The largest peak-to-trough decline in value over a specified period.
Volatility: The degree to which an investment’s price fluctuates over time.
Beta: Measure of an investment’s volatility relative to a benchmark, often the S&P 500.
Total return: Investment performance including price changes plus dividends, assuming dividends are reinvested.
Sector tilt: When a fund allocates more of its assets to certain industries than the broader market.
AUM (Assets under management): Total market value of all assets managed by a fund.

Robert Izquierdo has positions in ASML and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends ASML, Taiwan Semiconductor Manufacturing, and Tencent. The Motley Fool has a disclosure policy.