Learn More About Vanguard Emerging Markets Stock Index (VEIEX)

If you're considering adding Vanguard Emerging Markets Stock Index (VEIEX) to your investment portfolio, here is some basic information about this mutual fund to help you determine whether it is well suited to helping you accomplish your investment goals.

DESCRIPTION

Here is a description of the fund, from the Vanguard Emerging Markets Stock Index prospectus:

The investment seeks to track the performance of the MSCI Emerging Markets index. The fund employs a passively managed investment approach by investing all or substantially all of assets in a representative sample of the common stocks included in the MSCI Emerging Markets index. This index includes approximately 781 common stocks of companies located in emerging markets around the world.

EXPENSE RATIO

One of the most important details about any mutual fund is its expense ratio. The expense ratio tells investors how much of their investment will be lost (annually) to things like management fees and money spent to advertise and promote the mutual fund.

Obviously, the lower the expense ratio, the better.

According to 2008 Investment News data, the average expense ratio for an actively managed mutual fund (meaning the fund manager actively trades the assets in the fund's portfolio) was about 1.25%.

However, some passively managed mutual funds -- for instance, those that attempt to mirror an index, and whose assets are not traded frequently -- have expense ratios as low as about 0.15%.

The expense ratio for Vanguard Emerging Markets Stock Index is 0.39%. That's 69% less than the average actively managed mutual fund.

To put that into perspective, if you were to invest $10,000 in Vanguard Emerging Markets Stock Index, your annual expenses would be $39 - whereas if you were to invest $10,000 in the average actively managed mutual fund, your annual expenses would be $125.

TOP HOLDINGS

Are you curious which stocks Vanguard Emerging Markets Stock Index actually holds?

Here are the top five holdings, in terms of their percentage of total assets:

• CHINA MOBILE LTD. (2.97%)
• SAMSUNG ELECTRONICS (2.05%)
• TEVA PHARMACEUTICAL INDUSTRIES (2.03%)
• GAZPROM OAO (EDR) (1.98%)
• PETROLEO BRASILEIRO SA PETROBRAS (1.69%)

As you can see, these holdings are based in emerging markets around the globe. China Mobile and the Korean-based Samsung Electronics are both from Asian markets. Teva is an Israeli company. Gazprom is based in Russia. And Petroleo Brasileiro is based in Brazil.

HOW THE FUND HAS PERFORMED

Although a mutual fund's past returns do not guarantee future performance, knowing how a fund has fared recently (especially when compared with similar funds) is important information every investor ought to consider when deciding whether to add the fund to his or her portfolio.

In the past year (09/17/2008 - 09/17/2009), Vanguard Emerging Markets Stock Index has gained a whopping 49.73%.

In comparison, during the same period, the Standard & Poor's 500 index has gained 11.03%.

ANALYSIS

Is Vanguard Emerging Markets Stock Index right for your investment portfolio?

That depends on your investment goals.

Morningstar, the investment research firm, classifies Vanguard Emerging Markets Stock Index as a "Diversified Emerging Markets" mutual fund. Here is Morningstar's description of Diversified Emerging Markets funds:

Diversified emerging-markets funds invest at least 50% of stock assets in developing nations. Most funds divide their assets among 20 or more nations, although they tend to focus on the emerging markets of Asia and Latin America rather than on those of the Middle East, Africa, or Europe. Thus, popular destinations include Hong Kong, Korea, Mexico, and Brazil. Whatever their favorite nations, all these funds have the potential for large price swings.

Thus, if you're looking for a mutual fund that offers wide exposure to emerging economies around the world and you've got the risk tolerance (and along enough investment timeline) to deal with major price swings, Vanguard Emerging Markets Stock Index might be right for you.

DISCLAIMER

The information contained in this overview of Vanguard Emerging Markets Stock Index is for information purposes only. It does not constitute, nor should it be interpreted as, legal, financial, or other advice. The mutual fund described above is not being recommended or endorsed, nor is this article making any projections or guarantees about the future returns of the fund or the suitability of any particular investment, security or investment strategy.

If you would like professional advice about mutual fund investment, please contact an independent financial adviser.