Investors may want to reduce their exposure to the world’s largest emerging market.

Perth Tolle, who’s the founder of Life + Liberty Indexes, warns China’s capitalism model is unsustainable.

“I think the thinking used to be that their capitalism would lead to democracy,” she told CNBC’s “ETF Edge” this week. “Economic freedom is a necessary, but not sufficient precondition for personal freedom.”

She runs the Freedom 100 Emerging Markets ETF — which is up more than 43% since its first day of trading on May 23, 2019. So far this year, Tolle’s ETF is up 9%, while the iShares China Large-Cap ETF, which tracks the country’s biggest stocks, is up 19%.

The fund has never invested in China, according to Tolle.

Tolle spent part of her childhood in Beijing. When she started at Fidelity Investments as a private wealth advisor in 2004, Tolle noted all of her clients wanted exposure to China’s market.

“I didn’t want to personally be investing in China at that point, but everyone else did,” she said. “Then, I had clients from Russia who said, ‘I don’t want to invest in Russia because it’s like funding terrorism.’ And, look how prescient that is today. So, my own experience and those of some of my clients led me to this idea in the end.”

She prefers emerging economies that prioritize freedom.

“Without that, the economy is going to be constrained,” she added.

ETF investor Tom Lydon, who is the former VettaFi head, also sees China as a risky investment.

 “If you look at emerging markets… by not being in China from a performance standpoint, it’s provided less volatility and better performance,” Lydon said.

Warren Buffett released Saturday his annual letter to shareholders.

In it, the CEO of Berkshire Hathaway discussed how he still preferred stocks over cash, despite the conglomerate’s massive cash hoard. He also lauded successor Greg Able for his ability to pick opportunities — and compared him to the late Charlie Munger.

The mystery over Warren Buffett’s surprisingly defensive stance deepened over the weekend.

The 94-year-old CEO of Berkshire Hathaway sold more stocks in the latest quarter and grew a record cash pile even larger to $334 billion, but failed to explain in his highly anticipated annual letter why the investor known for his astute equity purchases over time was seemingly battening down the hatches.

Instead Buffett said that this posture in no way represented a move away from his love for stocks.

“Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities,” Buffett wrote in the 2024 annual letter released Saturday. “That preference won’t change.”

Berkshire’s monstrous ownership of cash has raised questions among shareholders and observers especially as interest rates are expected to fall from their multi-year highs. The Berkshire CEO and chairman in recent years has expressed frustration about an expensive market and few buying opportunities. Some investors and analysts have grown impatient with the lack of action and have sought an explanation why.

Despite his repeated selling of stock, Buffett said Berkshire will continue to prefer equities to cash.

“Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities – mostly American equities although many of these will have international operations of significance,” Buffett wrote. “Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned.”

Shareholders will have to wait a little longer it seems as the Omaha-based conglomerate net sold equities for a ninth consecutive quarter in the final period of last year, according to the company’s annual report, which was also released on Saturday.

All told, Berkshire sold more than $134 billion worth of stocks in 2024. This is mainly due to the sales of Berkshire’s two largest equity holdings — Apple and Bank of America.

Meanwhile, it appears Buffett is not finding his own stock attractive either. Berkshire continued its buyback halt, repurchasing no shares in the fourth quarter or in the first quarter through Feb. 10.

This is despite a massive increase in operating earnings reported by the conglomerate on Saturday.

At last year’s annual meeting, Buffett surprised many by announcing that Abel, vice-chairman of non-insurance operations, will have the final say on all Berkshire’s investing decisions, including overseeing the public stock portfolio.

Some investors and analysts have speculated Buffett’s conservative moves in the last year are not a market call, but him preparing the company for Abel by paring outsized positions and building up cash for him to deploy one day.

Buffett did signal he would be deploying capital in one area: the five Japanese trading houses he began buying nearly six years go.

“Over time, you will likely see Berkshire’s ownership of all five increase somewhat,” he wrote.