Portfolio a alokace
How Large an Emerging Markets Allocation to Hold
Key takeaways
- Emerging markets (EM) offer exposure to fast-growing economies, but at the cost of higher volatility and specific risks.
- In a global all-world index, EM represent roughly 10–11% — many investors consider this sufficient.
- A higher EM allocation (15–25%) makes sense with a long horizon and a deliberate acceptance of greater volatility.
- Key EM risks: political instability, weaker shareholder protections, currency volatility.
Emerging markets — China, India, Brazil, Taiwan, and others — offer exposure to economies with faster potential growth, but at the cost of higher volatility and different risks.
What Emerging Markets Are
MSCI classifies markets as "emerging" (EM) based on three criteria: economic development, market accessibility for foreign investors, and liquidity. The MSCI EM index today covers more than 20 countries — from China and India to Mexico, Brazil, and Saudi Arabia.
How Much EM Is in a Standard All-World Index
The MSCI All Country World Index (ACWI) assigns EM approximately 10–11% weight. If you buy an All-World ETF, you therefore already have EM exposure automatically. For many investors, this is sufficient.
When to Increase the EM Allocation
Some investors hold an EM overweight (15–25%) if:
- they believe in long-term demographic opportunities (Asia's middle class, Africa);
- they have a 15+ year horizon and can tolerate higher short-term volatility;
- they want lower correlation with the US market.
However, it's important to note that EM returns have lagged developed markets over recent decades — demographic potential does not always translate into stock market performance.
Risks That Cannot Be Ignored
EM carries risks that either don't exist or are smaller in the US or Europe: political decisions that change the rules overnight (e.g. regulation of China's tech sector), weaker minority shareholder protections, currency instability, and lower accounting transparency.
How to Do It
Separate EM ETFs (MSCI EM, FTSE EM) allow flexible allocation above and beyond an All-World. If you're considering this, read more about portfolio construction and how a stock index works.
FAQ
Are emerging markets riskier than developed markets?
Yes, they typically show higher volatility, political risks, and currency fluctuations. They also offer exposure to faster-growing economies. Higher return potential comes with higher risk — that's the fundamental trade-off.
What percentage of EM should I have in my portfolio?
The market-cap weight in an All-World index gives EM roughly 10–11%. That's a sensible starting point. A deliberate overweight of 15–25% makes sense with a long horizon and an understanding of the specific risks — not as a way to "make money fast."
What is MSCI Emerging Markets?
An index from global agency MSCI covering equity markets across more than 20 emerging countries — China, India, Brazil, Taiwan, and others. It serves as the benchmark for EM ETFs and shows the aggregate performance of these markets.