You Might Be Surprised
Let me start by saying I have not and will not invest in companies located in Russia. At least, that is my intention. However, sometimes we can be invested in companies and countries that fly against our worldview because of ETF or mutual fund investments. We might not realize we have invested some of our assets in questionable countries. One of the risks associated with buying ETFs and Mutual Funds, especially those that are “international”, or “emerging markets”, or even focused on specific sectors and natural resources is the probability that you and I are invested in something we find distasteful. The reality is that most investors don’t realize where their money is working.
Russia as an Example
It isn’t likely much of your investment portfolio is invested in Russia. However, if you add China to the mix, you might find you are an owner of businesses in a country that is less than desirable if you have ethical standards regarding human life and the treatment of workers. With the recent turmoil and war being waged by Russia on Ukraine, it is wise to look at your “international” investments and make certain you aren’t putting money to work in places that don’t align with your values. While it is probably impossible to avoid investing in some way in China, you can minimize your exposure to that country’s businesses.
Are Russia ETFs a Bargain?
Even before the war became distressing, Russia has not been a good place for most investors. A quick review of some Russia ETFs on Seeking Alpha makes it clear that there isn’t much demand for this type of focused investment. Here is a side-by-side comparison of five ETFs. There are three things that should raise alarm bells in the mind of a careful investor. 1) The expense ratios are ridiculous. 2) The assets under management (AUM) are pitifully small. This increases your trading risks. 3) Although the funds are “international” they really are “Russia” funds. Also note that while the dividend yields are attractive, there is nothing else about these funds that a rational investor should really admire.
DEM WisdomTree Emerging Markets High Dividend ETF
One ETF that many investors could own has the ticker symbol DEM. At first glance, the fund name might be a tempting addition to a dividend investor’s portfolio. However, over 35% of this fund has assets in Russia and China, with Russia making up 17.67% of the fund. Therefore, if you own “emerging markets” mutual funds or ETFs, you might want to find out which countries your fund selects for investments. If you have an advisor doing work for you, do they know about this and have they complied with your wishes? In other words, do you know what you own and does what you own match what you say are your values?
At the very least, make certain you aren’t invested in a fund like the VanEck ETF Trust – VanEck Russia ETF (RSX) if you care about human rights.