Emerging markets now represent a much larger share of the world's economy than they did even 10 years ago.
Why? Countries that used to be considered “developing”, like Brazil, India, and China, are no longer developing.
And some of these countries are growing faster than the U.S. and other western economies.
For instance, Brazil’s GDP grew by 3.4% to reach $2.2 trillion. U.S. GDP grew by only 2.8% in 2024.
That growth is creating profit opportunities that don't exist in saturated U.S. markets.
To be clear: The U.S. economy and markets are still growing and as of December 2025, are the largest in the world.
But even still, many emerging market funds are showing returns that are double what the S&P 500 delivered in 2025.
It’s not easy for American investors to get access to these markets, but there are a few unique emerging market ETFs and funds that give Americans exposure to this explosive growth.
Below, we’ll show you why emerging markets are growing so rapidly right now, how you can get access, and what potential opportunities there are for investors.
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What Actually Is an Emerging Market? (And Why It Matters)
Before we go any further, let's clear up what an emerging market is.
An emerging market is an economy that's transitioning from "developing nation" to "developed nation."
Think of it like a company going from startup to major player. There's massive growth potential, but also growing pains along the way.
Investment groups like MSCI and BlackRock have been talking about emerging markets for years.
The reason?
- High yield potential - these markets can deliver returns that mature economies typically can't match anymore.
- Diversification - when U.S. markets stumble, emerging markets don't always follow the same pattern.
So what changed?
Emerging markets in Asia and Africa now represent the majority of working-aged adults globally. That's a lot of people entering the workforce, starting businesses, and buying their first homes.
But growth comes with volatility - some years they soar and others they fall hard.
That's why investment groups have been pushing hard for investors to include emerging markets in their portfolios - not as a gamble, but as a calculated diversification play.
The data shows emerging market countries now control a much larger piece of the global economic pie than they used to.
So when you invest in emerging markets, you're not betting on "risky foreign stocks." You're gaining exposure to where a huge chunk of global growth is actually happening.
Is It Actually Smart to Invest in Emerging Markets?
Let's address the elephant in the room.
You've probably heard emerging markets are "too risky" or "too volatile" for regular investors.
Here's the truth: Emerging markets usually are riskier than U.S. stocks.
Think about it this way:
The upside:
- Many emerging market funds outpaced the S&P 500 in 2025.
- You get exposure to economies growing at 6-8% annually (compared to 2-3% in developed nations).
- Real diversification - these markets don't always move in sync with Wall Street.
The downside:
- Higher volatility means bigger price swings (both up and down).
- Political instability can impact returns overnight.
- Currency fluctuations add another layer of risk.
- Less regulatory protection than U.S. markets.
So is it smart? That depends entirely on your situation.
If you're 25 with decades until retirement, some investors may be okay with the volatility for potentially higher returns.
If you're 65 and living off your portfolio, putting a large chunk into emerging markets might keep you up at night.
Here's what experts generally agree on: Emerging markets shouldn't be your ENTIRE portfolio.
But many experts suggest that investors looking for growth should have some of their portfolio in emerging market funds.
The sweet spot for most investors? Somewhere between 5-20% of your total portfolio, depending on your risk tolerance.
The bottom line: "Smart" isn't the same for everyone. But ignoring emerging markets entirely might mean missing out on where significant global growth is happening.
It’s always important to mention - always do your own due diligence before investing.
Every situation is different, so assess your own goals, risk tolerance, and time horizon before investing.
The Top 5 Emerging Markets You Should Know About
Not all emerging markets are the same.
Some are massive manufacturing powerhouses. Others are resource-rich but politically unstable.
Here are the five markets that keep showing up in top-performing funds:
1. China
Still the world's second-largest economy. Growth has slowed compared to a decade ago, but it’s clear that China has officially emerged and offers some potential growth opportunities.
2. India
One of the fastest-growing major economies globally with a young population entering the workforce. India’s tech sector is also expanding rapidly alongside its economy.
India is the 5th largest economy in the world by GDP, and some experts believe it is on pace to overtake Japan at the 4th spot in the next few years.
3. Brazil
Brazil’s fintech industries are exploding, along with its economy. It’s also one of the fastest growing economies in the world. We’ll break down Brazil more later on.
4. Taiwan
Dominates semiconductor manufacturing, and it's currently the 21st largest economy in the world by GDP.
5. United Arab Emirates
Real estate and its exposure to oil have allowed the UAE to grow rapidly in the last few decades.
It’s now growing into a fully diversified economy.
When you invest in a broad emerging market ETF, you're essentially betting on the combined growth of these economies.
Each has different strengths and different risks - next, we’ll discuss the emerging market options investors may want to consider.
How to Actually Invest: Your Three Main Options
Investors have three main ways to invest in emerging markets: equity funds, bonds, and real estate trusts.
Let's break them down:
Option 1: Equity Funds (The Most Common Route)
This is what most people think of when they hear "emerging market investing." It’s the most common because these ETFs are the easiest to access emerging markets.
Why? ETFs trade just like regular stock - so you’re essentially buying shares in a fund that holds stocks in companies from emerging market countries.
There are two approaches here:
Country-Specific Funds
These let you bet on one specific country's economy.
Take the iShares MSCI Brazil ETF (EWZ) as an example.
This fund focuses entirely on Brazil.
Its top 10 holdings include major financial companies, materials producers, and energy firms - the types of businesses that grow when a country's GDP grows.
The results? EWZ has outpaced the S&P 500 year to date as of December 2025.
That's the kind of performance that gets investors' attention.
But here's the catch: When you go all-in on one country, you're also accepting all of that country's specific risks.
Political changes, currency swings, or economic slowdowns hit you harder.
Broad Market Funds
The more popular option for most investors.
These funds spread your money across 20+ different emerging markets at once.
The Vanguard Emerging Markets Stock Index Fund (VWO) is one example. It includes mid-cap and small-cap companies from over 20 different countries.
Shares of VWO are up nearly 15% year-to-date. Not as dramatic as the Brazil-specific fund, but with significantly less concentration risk.
Option 2: Bonds (For Cash Flow Seekers)
Stocks get all the attention, but bonds could also be an opportunity for investors who want regular income.
Here's how these bonds work: You're lending money to emerging market governments or companies in exchange for interest payments.
There are three types of emerging market bonds:
Sovereign Bonds - Issued by governments, usually in U.S. dollars.
Corporate Bonds - Issued by businesses to raise capital.
Currency-Linked Bonds - Issued in the local currency (not dollars).
In 2025, the U.S. dollar has lost value compared to many world currencies. That makes currency-linked bonds potentially more attractive - if the dollar keeps falling, your returns go up.
But there's a problem: Most emerging market bonds are rated below “investment grade" by agencies like S&P and Moody's.
What does that mean? The rating agencies think these bonds are more likely to default.
The reality? Default rates on emerging market bonds tend to be very low. The agencies might just be overly cautious about non-U.S. debt.
For retail investors, the easiest way in is through bond ETFs.
Which ones? Our market analysts broke all of the potential options down in our Market Briefs Pro report. Learn more and subscribe here.
Option 3: Real Estate (The Overlooked Opportunity)
When a country's economy grows rapidly, property values skyrocket.
It happened in small towns across the U.S. during economic booms. It's happening right now in emerging markets.
Real estate in China and India has been especially attractive.
However, there are no REITs (Real Estate Investment Trusts) with direct emerging market exposure on U.S. exchanges.
So what do you do?
Investors can consider ETFs that hold global-exposure REITs with significant emerging market allocation.
Real estate moves slower than stocks, but it also tends to be less volatile.
When you combine that with emerging market growth rates, you get an interesting risk-reward balance.
How Much Should You Actually Invest in Emerging Markets?
This is the question everyone wants answered, but nobody can answer for you.
Why? Because "how much" depends entirely on factors only you know:
- Your age and time horizon.
- Your risk tolerance.
- Your other investments.
- Your financial goals.
But here's a framework that might help you think through it:
The Conservative Approach (5-10%)
If you're closer to retirement or prefer stability, keeping emerging markets to a small slice of your portfolio makes sense. You get diversification benefits without losing sleep over volatility.
The Moderate Approach (10-15%)
This is a more balanced approach - It gives investors enough exposure to capture growth, but not so much that a market downturn devastates your portfolio.
The Aggressive Approach (15-20%+)
Younger investors with decades until retirement who are willing to take on risk for potentially higher returns may want to consider allocating more to emerging market ETFs.
What's the Best ETF for Emerging Markets?
There's no single "best" ETF because different funds serve different purposes.
When comparing ETFs, look at:
- Expense ratio (lower is better - you keep more of your returns.)
- Assets under management (higher usually means better liquidity).
- Geographic concentration (how much is in China vs. spread across countries).
- Historical volatility (can you handle the swings?).
The "best" fund is the one that matches your specific strategy and risk tolerance.
If you want maximum diversification, go broad. If you have strong conviction about a specific country, go narrow. If you want income, go bonds.
There's no wrong answer - just different tools for different goals.
Emerging Market ETF Risks For Investors
Emerging markets are called "emerging" for a reason. They're not stable, developed economies.
That creates real risks like:
1. Political Instability
Governments change policies overnight and rapidly changing leadership changes could mean new conditions for the economy.
In the end, that makes these markets unpredictable, which can impact returns over time.
2. Currency Risk
Currency swings add a layer of complexity that doesn't exist in U.S. stocks, as the value of local currencies rising and falling in value changes returns for investors.
3. Information Barriers
Emerging markets "often lack reliable data and investor protections," according to real estate experts our analysts have spoken with.
You're making decisions with less information than you'd have for U.S. investments.
4. Limited Legal Protection
If something goes wrong, your options for recourse are limited.
5. Liquidity Concerns
Some emerging market securities trade less frequently than U.S. stocks. That means it could be harder to sell shares in these investments when you need to.
6. Tariff Exposure
As they gain exposure to global markets, emerging economies become vulnerable to trade policy changes.
Despite all these risks, the data shows emerging markets might be more resilient than major financial institutions give them credit for.
The Brazilian ETF was not as volatile as many experts thought it might be..
Most emerging market ETFs are still outperforming the S&P 500 even after factoring in their higher volatility.
That doesn't mean the risks disappeared. It means the potential rewards might justify the risks for the right investor.
But you need to go in with eyes wide open.
If you can't stomach a 20-30% drop in a single year (even if it recovers later), emerging markets probably aren't for you.
Emerging Market ETFs: Frequently Asked Questions
What is the best way to invest in emerging markets?
There is no “best” way to invest, as that depends on your goals, risk tolerance , and time horizon.
However, broad-market emerging market ETFs can spread your risk and potentially reduce volatility.
This gives you exposure to emerging market growth without betting everything on one country's political stability.
What are the top 5 emerging markets?
The five markets with the strongest presence in most funds are China, India, Brazil, Taiwan, and the UAE.
Is it smart to invest in emerging markets?
It depends on your situation.
Emerging markets offer higher growth potential but come with more volatility and risk.
Most experts suggest 5-20% allocation depending on your age and risk tolerance - enough to capture growth without exposing your entire portfolio to emerging market volatility.
How much should I invest in emerging markets?
Conservative investors may hold 5-10% of their portfolio in emerging market ETFs.
More moderate investors may consider 10-15% .
Aggressive, younger investors might go 15-20%+.
The key is choosing an allocation you can stick with during market swings without panic selling and that makes sense for you and your goals..
What is the best ETF for emerging markets?
There's no single "best" - it depends on your strategy.
Investors interested in emerging market ETFs may want to choose a fund based on whether they want diversification, country-specific exposure, or income generation.
What This All Means For Your Portfolio
Emerging markets are outperforming U.S. stocks in 2025.
Countries like Brazil, India, and Taiwan represent a growing share of the global economy.
Retail investors can access these opportunities through equity ETFs, bond funds, and real estate trusts without needing special accounts or millions of dollars.
But not all emerging market ETFs will beat the S&P 500, as nothing can go up forever.
Political instability, currency swings, and information barriers create challenges that don't exist in U.S. markets.
That makes emerging market funds riskier than U.S. markets for the most part.
But investors who understand the risks and are in the right position to invest may want to keep an eye on this shift, as these economies continue to grow over the next few years.
Our market analysts broke these opportunities down more in-depth in our Market Briefs Pro report - get the full report and subscribe here.
