The term “emerging markets” doesn’t mean what it used to. The terms was coined in by World Bank economist Antoine Van Agtmael in the 1980s, and it’s hard to believe that the same counties that were “emerging” back then are still “emerging” today. However, no one has stepped forward with a better term and now “emerging markets” has become an umbrella term that’s applied to most of the world’s economies.

But that’s precisely why investors looking at “emerging markets” may need to be a touch more discerning. Far from the traditional BRIC countries (Brazil, Russia, India, and China) associated with the term when it first came in vogue, dozens of different nations are now considered “emerging” for the purposes of investing. Which also means that the diversity of different economies and business climates in this realm is off the charts compared to the 1980s. Treating the entire segment like a monolith could be a costly mistake.

That said, the whole purpose of the iShares MSCI Emerging Markets Index ETF (EEM) is trading emerging markets like a monolith. That said, it is a chance to potentially catch hold of some of the rapid economic growth these countries can show that established economies can't. And the losses that can stem from greater instability and volatility. However, unlike the SPDR S&P 500 ETF ($SPY), which matches the movement of a well-known, widely visible index, EEM tracks an index that many people aren't as familiar with. As such, it's probably worth taking the time to really examine what is in this popular ETF.

MSCI Emerging Markets Index

Like most ETFs, the EEM is tied to a specific index. In this case, it's the MSCI Emerging Market Index. Created by MSCI, Inc. (MSCI) , the index consists of large- and mid-cap companies from emerging markets around the world. With 818 constituents from 21 different countries, it covers approximately 85 percent of the free float adjusted market capitalization in each of the countries. The basis for the index is the MSCI Global Investable Market Indices Methodology.

The largest holding in the index is South Korea's Samsung Electronics (SSNLF) at 3.95 percent. There are eight other companies that make up more than 1 percent of the index:
Taiwan Semiconductor Manufacturing ($TSM) – Taiwan – 2.38 percent

China Mobile (CHN) – China – 1.64 percent

China Construction Bank (CICHY) – China – 1.45 percent

Tencent Holdings (TCTZF) – China – 1.44 percent

Gazprom (OGZPY) – Russia – 1.44 percent

ICBC (HKG:1398) – China – 1.34 percent

America Movil (AMX) – Mexico – 1.02 percent

Itau Unibanco Holding (ITUB) – Brazil – 1.01 percent

The remaining 809 companies all make up 1 percent or less. All told, the index consists of 19.96 percent Chinese companies, 15.9 percent South Korean companies, 11.75 percent Brazilian companies, 11.45 percent Taiwanese companies, 7.47 percent South African companies, and the remaining 34.49 percent of the index comes from one of the 16 remaining countries.

MSCI Emerging Markets ETF

As with any good ETF, knowing the index means knowing the fund. The MSCI Emerging Markets ETF differs in composition from the index it tracks only slightly (Samsung makes up 3.96 percent of the ETF, for instance). While the results are generally close, the ETF has missed by margins that one wouldn't be likely to see with some other ETFs. Over the last four years:

2012: EEM: 15.18 percent   MSCI EM Index:15.15 percent

2011: EEM: -20.36 percent   MSCI EM Index: -20.41 percet

2010: EEM: 15.64 percent   MSCI EM Index: 16.36 percent

The 0.72 percent miss in 2010 clearly stands out.