EWZ VS IWM
The financial market provides a plethora of investment opportunities. Exchange-traded funds (ETFs), in particular, offer a way for investors to diversify their portfolios without having to buy individual stocks. In today’s article, we dive into two popular ETFs: EWZ and IWM. By comparing these funds, we hope to provide you with valuable insights to aid in your investment decisions.
EWZ VS IWM: Sectors and Top Holdings
EWZ is an ETF that tracks the performance of the Brazilian stock market. It specifically targets the MSCI Brazil Index, a benchmark for large and mid-cap Brazilian equities. Some of its top holdings are in the financial, energy, and materials sectors, representing companies like Itau Unibanco, Petrobras, and Vale.
On the other hand, IWM focuses on small-cap stocks within the United States, tracking the Russell 2000 Index. This index offers a diversified exposure across sectors but leans heavily on healthcare, technology, and financial services, with top holdings like Plug Power Inc, Penn National Gaming, and SunRun Inc.
EWZ overlap EWZ VS IWM
EWZ VS IWM: Capitalization strategy
Capitalization strategy is crucial in understanding the risk and reward potential of any ETF. As previously mentioned, EWZ invests in large and mid-cap Brazilian stocks. This means that while the fund offers exposure to Brazil's growing economy, it's less volatile than one which would be focused on smaller companies.
IWM, conversely, is a small-cap ETF. Smaller companies, while offering significant growth potential, come with increased volatility. However, the U.S market’s stability and the diversified nature of the Russell 2000 somewhat mitigate this risk. In essence, while EWZ leans on the steady growth of established Brazilian companies, IWM gambles on the potential booms of smaller U.S firms.
EWZ VS IWM: Tracking and Exposure
Tracking pertains to how closely an ETF replicates the performance of its underlying index. Both EWZ and IWM have shown good tracking performance, with minor discrepancies attributed to fees or temporary market conditions.
Exposure is where the significant differences lie. As already touched upon, EWZ offers direct exposure to Brazil's market. If you're bullish on Brazil's economy and foresee growth, EWZ is a solid choice. However, being country-specific, it’s more susceptible to regional socio-economic and political factors.
IWM, meanwhile, presents exposure to the broader U.S economy but through the lens of its small-cap stocks. The U.S, with its established economy, provides a different kind of security and growth potential compared to the emerging Brazilian market. IWM's focus on small-cap stocks also offers a unique way to tap into this potential, looking for growth stories rather than established giants.
Conclusion
Choosing between EWZ and IWM ultimately boils down to your investment goals and risk appetite. If you're seeking exposure to an emerging market with sizable growth potential, EWZ might be the way to go. However, if you want a slice of the U.S economy with the added excitement of small-cap stocks, IWM should be on your radar.
Remember, diversification is key. Perhaps, a balanced approach, having a bit of both ETFs, might be the best way to harness the strengths of both while mitigating potential risks.
Sources
- BlackRock. (2021). iShares MSCI Brazil ETF.
- FTSE Russell. (2021). Russell 2000 Index.
- Morningstar. (2021). ETF Analysis - EWZ and IWM comparison.
EWZ ETF issuer
EWZ ETF official page
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