Retirees Should Give Fidelity's Forgotten Emerging Markets ETF a Look Right Now

"Emerging markets climbed over 25% in 2025 while trading at deep discounts to U.S. equities. That combination of momentum and relative value creates an unusual setup for 2026 that retirees seeking diversification should consider. The Fidelity Emerging Markets Multifactor ETF ( NYSEARCA:FDEM) screens for quality, value, momentum, and low volatility factors across developing economies. The fund holds $296.9 million in assets and delivered a 29.2% one-year return through early January 2026, outpacing the SPDR S&P 500 ETF Trust ( NYSEARCA:SPY) by over 13 percentage points."

"FDEM doesn't track a market-cap-weighted index. It tilts toward companies scoring well on multiple investment factors, holding Tencent ( OTC:TCEHY), Samsung Electronics ( OTC:SSNLF), and HDFC Bank ( NYSE:HDB) among top positions while maintaining a 15% cash position. This factor-based approach targets companies with stronger fundamentals and better risk-adjusted returns than pure index strategies. For retirees, that means potentially smoother performance during volatile periods, though 65% portfolio turnover means more frequent trading than passive alternatives."

"Emerging markets have historically traded at discounts to U.S. equities, a pattern that persisted even after 2025's strong performance. Earnings growth expectations for emerging markets have improved heading into 2026, with projections showing strength relative to non-U.S. developed markets. The fund's 0.27% expense ratio is competitive for an actively managed factor strategy. It pays a 1.85% dividend yield with quarterly distributions that grew from $0.696 in 2021 to $0.997 in 2025, though individual payments fluctuate significantly."

Emerging markets rose over 25% in 2025 while continuing to trade at discounts to U.S. equities, creating a valuation and momentum setup for 2026. The Fidelity Emerging Markets Multifactor ETF (FDEM) screens for quality, value, momentum, and low-volatility factors and holds $296.9 million in assets. FDEM returned 29.2% over the prior year, outperforming the SPDR S&P 500 ETF Trust by about 13 percentage points. Top holdings include Tencent, Samsung Electronics, and HDFC Bank, alongside a 15% cash allocation. The fund charges a 0.27% expense ratio, yields 1.85% with variable quarterly payouts, has roughly 65% turnover, and may face liquidity constraints given its small asset base.

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