Emerging Markets: Opportunities, Risks and How to Invest

July 2026

By Will Glyn

Most expat portfolios I review have the same quiet gap. They are full of the familiar — US tech, a few European names, a chunk of home-market favourites — and hold almost nothing in the parts of the world that are actually growing the fastest. It is completely understandable; we invest in what we know. But it does mean a lot of people are sitting out one of the few places where long-term growth is still relatively cheap to buy.

That, in a sentence, is the case for emerging markets. Economies such as India, Indonesia and Vietnam have young, growing, working-age populations, expanding middle classes and rising productivity — the raw ingredients that let a country grow faster than its developed peers for years, sometimes decades. Growth and stock market returns never move in perfect step, but over the long run stronger earnings tend to show up as stronger returns.

So in this piece I want to do three things: explain what emerging markets actually are, be honest about the risks that come with them, and set out the practical ways to get exposure — with a few points I always flag for clients who live overseas.

What we actually mean by “emerging markets”

Broadly, an emerging market is an economy that is growing and industrialising but has not yet reached the wealth, stability and market maturity of a developed nation. The label covers a huge range, from the giants — China, India, Taiwan, South Korea and Brazil — down to smaller, faster-growing markets across Asia, Latin America, the Middle East and Africa.

Here is something that catches people out: the definition depends on who you ask. MSCI, one of the big index providers, still classes South Korea as an emerging market. Its rival FTSE Russell does not — it has treated South Korea as fully developed since 2009. That single difference means two funds both labelled “emerging markets” can look very different under the bonnet: one heavy in Korean technology giants, the other tilted more towards China. Before you buy anything, it is worth checking which index your fund actually tracks.

Why I think they’re worth holding

Three reasons, really. The first is growth, as above. The second is diversification. Because emerging economies often run on a different cycle to the West — driven more by local consumption and domestic investment — they can hold up when developed markets are wobbling, which takes some of the sting out of a bad year.

The third is access. Emerging markets give you exposure to companies and sectors you simply won’t find in a typical developed-market portfolio. Taiwan and South Korea, for instance, are home to the world’s leading semiconductor manufacturers — the businesses at the very centre of the global AI boom — alongside fast-growing domestic industries across Asia and Latin America. Leave emerging markets out entirely and you quietly miss a large part of that story.

The risks I always flag to clients

None of this comes for free. Emerging markets can be noticeably more volatile than developed ones — political instability, weaker corporate governance and thinner trading can all move prices sharply.

Currency is a big one, and it matters especially to expats. Many emerging economies borrow in US dollars rather than their own currencies, and a lot of commodities are priced in dollars too. As a rough rule, a strong dollar is a headwind for emerging markets and a weaker dollar is a tailwind. If you are already living your financial life across two or three currencies, that will feel familiar — the currency can matter as much as the underlying investment.

The risk I am watching most closely right now is concentration. The rush into AI has made the main emerging markets index unusually top-heavy: according to MSCI’s own data, information technology now makes up more than 40% of the MSCI Emerging Markets index, much of it in a handful of Taiwanese and Korean chipmakers. That is a very different animal from the index of a decade ago, and worth understanding before you assume “emerging markets” means broad, spread-out exposure.

How they’ve actually performed

The long-term numbers make the case better than I can. Over the past decade the MSCI Emerging Markets index has returned roughly 11% a year, against about 8–9% a year for the FTSE 100. Put in pounds and before charges, that is the difference between £1,000 growing to close to £3,000 and to about £2,300 over ten years.

I always add the same caveat: past performance is not a guide to the future, and emerging markets delivered those returns with a distinctly bumpier ride along the way. But the long-term argument has held up.

How to get exposure

For most people, a fund makes far more sense than buying individual shares. Trading emerging market companies directly can be awkward — foreign investors face restrictions in some markets, dealing costs are wider, and liquidity can be thin. Broadly, you have two routes:

• Index-tracking funds and ETFs — give low-cost, diversified exposure to a whole market, with ongoing charges on the largest emerging market trackers as low as around 0.18% a year.
• Actively managed funds — aim to beat the index by picking stocks, but charge more for the attempt, and plenty of them fall short.

Which one suits you comes down to how much you are willing to pay for the chance of doing better than the index.

It is not only about shares, either. Emerging market bonds are usually bought for income rather than growth, and tend to yield more than developed-market government bonds — often around 6% or higher — to compensate for the extra risk of default, currency swings and political uncertainty. Here too, funds and ETFs are usually the most practical way in.

And one point I cannot stress enough for expats: how you hold these investments, and how they are taxed, depends enormously on where you are resident. The wrappers that make sense for someone living in the UK are frequently the wrong ones once you have moved abroad, and getting that decision wrong can quietly cost you a great deal. This is exactly where personal advice earns its keep.

How We Can Help

At Proctor Wealth Associates we are independent advisers who work with expats all over the world, and emerging markets exposure is one of the things we get asked about most. We can help you:

• Build a properly diversified portfolio — so your money is not quietly over-concentrated in your home market.
• Choose the right funds — weighing passive against active, and keeping a close eye on cost.
• Get the structure right for where you live — matching the wrapper and tax treatment to your country of residence, not the one you left.
• Review what you already hold — most people are more exposed to a handful of markets than they realise.
• Keep it on track — adjusting as you move country, change goals, or your circumstances shift.

If you would like to talk through how emerging markets might fit into your own plans, you can book a call with me and we will take it from there.

Will is an Independent Financial Adviser with over a decade of experience helping expats make the most of their international status.