While most of the world’s attention is focused on growth in China, analysts from Goldman Sachs (GS, quote) and Morgan Stanley (MS, quote) view India as having more potential. If so, exchange-traded funds like the Wisdom Tree Earnings Fund (EPI, quote) are the natural way to get exposure.
India presents strong upside potential. Growth has been at over 8%. The populace is young and highly educated. In the fields of scientific and technical management alone, the labor force is now over 20 million, and at 330 million, India has the largest middle class in the world.
The consumer segment of the economy is huge and growing. There is a strong legal system and private property rights are protected.
True, there are many India funds out there — including INDY (quote), PIN (quote) and INP (quote) –but the Wisdom Tree version is both the most liquid and by far the largest.
The Wisdom Tree Earnings Fund tracks the Wisdom Tree Earnings Index, which contains more than 250 securities.
As with every single other exchange-traded fund out there, this diversification alone is a major advantage for investing in an ETF for an individual. And because the index providers tend to have much better research capabilities — especially where emerging markets are concerned — these funds tend to represent much more thorough due diligence than anything the typical retail investor could come up with.
The Wisdom Tree Earnings Fund also offers a low price-to-earnings ratio of 9 and a low book value as well. Dividend is modest, but at the moment it is enough to cover its expense ratio of 0.88%.
For those concerned about a weaker dollar, transactions are in rupee terms, providing some degree of currency protection.