Emerging Markets (EM)—countries like China, India, and Brazil—are the primary drivers of potential global growth, yet they come with significant volatility. For a truly diversified portfolio, EM exposure is essential. The two dominant choices for low-cost access are **VWO (Vanguard FTSE Emerging Markets ETF)** and **IEMG (iShares Core MSCI Emerging Markets ETF)**. While both cover the same broad mandate, their core difference lies in the index they track and, crucially, their inclusion of a major economy: **South Korea**. This decision point directly impacts your risk and return profile. This guide helps you determine which EM ETF to **Just Copy & Paste** for your long-term, high-growth satellite allocation.

World map highlighting major Emerging Market countries with a special callout on South Korea's classification difference between FTSE and MSCI


**Beginner Friendly Tip:** Emerging Markets are often characterized by rapid economic growth but less stable political and financial systems. This makes them high-risk, high-reward components of a global portfolio.

The Index War: FTSE vs. MSCI

The entire difference between VWO and IEMG boils down to the index provider they use:

1. VWO (FTSE Index)

VWO tracks the FTSE index. The FTSE classifies **South Korea as a Developed Market**. Therefore, VWO **EXCLUDES** South Korea. VWO is often seen as a purer play on the riskier, higher-growth emerging nations. It holds slightly fewer stocks (around 4,500).

2. IEMG (MSCI Index)

IEMG tracks the MSCI index. The MSCI classifies **South Korea as an Emerging Market**. Therefore, IEMG **INCLUDES** South Korea. Because South Korea is a stable, large economy, its inclusion generally makes IEMG less volatile than VWO. IEMG holds more stocks (around 6,000).

3. Expense Ratio

Both are ultra-low cost, but IEMG holds a slight edge: **IEMG is 0.07%** while **VWO is 0.08%**. While minimal, this cost difference compounds over decades.

Chart comparing the allocation percentage difference in South Korea (0% in VWO vs ~12% in IEMG).


The Critical Comparison Table (VWO vs IEMG)

Use this table to weigh the impact of South Korea on your diversification goals.

HTML & CSS Code (Comparison Table)

This clean, responsive table helps readers quickly grasp the key differences. 


    

        
            

                Feature
                VWO (Vanguard)
                IEMG (iShares)
            

        
        
            

                Tracking Index
                FTSE Index
                MSCI Index
            

            

                South Korea Inclusion
                EXCLUDED (FTSE Developed)
                INCLUDED (MSCI Emerging)
            

            

                Expense Ratio
                0.08%
                0.07%
            

            

                Best For
                Highest Risk, 'Pure' EM Exposure
                Lower Cost, Lower Volatility, Broader Coverage

The Verdict: Why IEMG is Often the Preferred Choice

For the vast majority of investors seeking simple, low-cost exposure to the Emerging Markets, **IEMG is the slightly superior choice.**

1. Cost Advantage

The 0.01% lower expense ratio provides a small but real advantage over a long time horizon.

2. Broader Holdings

IEMG holds significantly more stocks than VWO, offering wider diversification across the EM landscape.

3. The South Korea Debate

If you also own a Developed Market ETF (like IEFA or VXUS, which already contains Korea), owning IEMG creates a small overlap. However, this overlap is minor compared to the benefit of IEMG's lower cost and broader scope. For most investors, the lower volatility provided by Korea’s inclusion is a welcome stabilizer in a high-risk asset class.

Total return comparison graph of VWO vs IEMG over a 5-year period


Conclusion: Simple, Low-Cost EM Exposure

If you are building a simple, globally diversified portfolio, the combination of VTI, VXUS, and BND/BNDX is sufficient. If you decide to carve out a specific, high-growth EM allocation, **IEMG is the most efficient and slightly less volatile option.**