Buying This ILF Dip Has A Price

The fund’s history shows that buying a drop has often paid off, but not without some serious bumps along the way.

For owners of the iShares Latin America 40 ETF (ILF), the median return in the twelve months after a dip of this size was +9%. That history is tempting, especially with the fund now sitting about 10.6% below its 52-week high of $38.10. When a fund goes on sale, the natural question is whether to buy more. Is this a gift, or is it a trap?

The answer often depends on what the fund holds. A broad, diversified basket of stocks has a natural tendency to bounce back. A concentrated fund, however, can stay underwater for a long time. For ILF, the historical record is supportive, but it comes with a serious catch.

The Rebound Record Has Been Decent, Not Perfect

Looking back, ILF has taken a dive of this magnitude on 22 separate occasions since 2005. Of those 22 instances, 14 were followed by a positive return over the next twelve months. That is a positive outcome more often than not, but far from a sure thing. The typical rebound reached a median peak gain of +23% at some point in the year after the drop.

History offers some concrete examples of this varied performance. A dip buyer in December 2024 saw a 54% gain a year later. But buyers during the June 2024 and October 2023 dips saw a more modest 9% return over the following year. The past shows a pattern of recovery, but the scale of that recovery has been unpredictable.

But First, You Had To Endure More Downside

Here is the catch. Buying the dip in ILF has historically required a strong stomach. The median worst further drawdown in the year after a purchase was 10%. To put that plainly, a typical buyer had to watch their new investment fall another 10% before the recovery began. That is a steep price of admission, and it is the kind of pain that can shake out even determined investors.

This pattern of volatile recoveries is not unique to ILF. For a look at how another concentrated regional fund has behaved after similar drops, it is worth seeing the history for EWY.

A Concentrated Basket Explains The Bumpy Ride

So why the volatility? The answer lies inside the fund itself. ILF is not a sprawling, diversified global fund. It holds just 41 positions, and it is quite top-heavy. The five largest holdings make up 34% of the fund, and the top ten account for 55%. With major stakes in companies like Nu (NU), Vale (VALE), and Itau Unibanco (ITUB), the fund’s fate is tied to a small number of prominent Latin American stocks.

This concentration is what makes the dip-buying decision for ILF different from buying a dip in a broad market index. The fund’s history suggests that these drops have been buying opportunities more often than not. But that same history shows the ride required enduring more downside first, a direct result of its focused portfolio. The question for an investor today is whether they believe in the prospects of this specific basket of stocks, and whether they have the discipline to handle the potential for a deeper slide before any potential rebound.

Is This Dip A Gift Or A Trap?

Staring at the dip in ILF, you are weighing whether to buy more or wait it out. The history above is an honest place to start. We know what you are thinking, and it is an absolutely fair question.

Still, a dip-and-recovery record is only half the story. It tells you what tended to happen after past drops, not whether the fund is reasonably valued today or how it is holding up against its peers right now. Before adding to a position, it is worth seeing where it actually stands: our ETF Valuation and Performance Scorecard lines the major ETFs up side by side on valuation, returns, and risk, so the dip becomes one input rather than the whole decision.

A Fund Is Only Part Of Your Portfolio, Check The Rest

A fund is just one piece of what you own, and the same scrutiny applies to every other position in your portfolio. How much damage any single position could do to your net worth is a question with a precise answer. The Trefis Wealth team computes it for investors professionally, with the same rules-based systematic discipline that runs our High Quality Portfolio. Request a free vulnerability audit of your biggest positions.