Do I Need Emerging Markets in My Portfolio?
Emerging markets are not strictly necessary — a FTSE All-World already includes them at around 10 %. The real question is whether you want to weight them HIGHER: that promises more growth potential, but also brings more volatility and political risk. A deliberate addition, not a must.
The short answer
You don’t need a separate emerging-markets ETF to be well diversified. A FTSE All-World already covers emerging markets (China, India, Taiwan, Brazil …) at around 10 %. A dedicated emerging-markets ETF only makes sense if you want to weight them deliberately higher than market capitalisation dictates — for example in the classic 70/30 strategy (70 % MSCI World, 30 % EM).
What speaks for emerging markets
- Growth potential: a younger population, a growing middle class, faster economic momentum than saturated developed markets.
- Valuation: EM equities are on average often valued more cheaply (lower P/E) than US stocks.
- Diversification: different economic cycles and sector mixes than the US-heavy MSCI World.
What speaks against it
- Higher volatility: EM often fall more sharply in crises and recover less steadily.
- Political risks: interventions, currency devaluations, legal uncertainty — especially because of the high China weighting.
- A disappointing decade: EM performed considerably worse than US equities in the 2010s. Outperformance is possible, but not guaranteed.
- China/Taiwan cluster: a few countries dominate the index heavily.
The typical weightings
How much in emerging markets suits whom?
| Approach | EM share | For whom |
|---|---|---|
| MSCI World only | 0 % | Anyone deliberately avoiding EM |
| FTSE All-World (1 ETF) | ~10 % | Market weighting, no effort |
| 70/30 (World + EM) | ~30 % | Anyone betting on EM growth |
| Higher than 30 % | >30 % | Strong conviction, high risk |
Canonical EM ETFs (as of June 2026)
Popular UCITS emerging-markets ETFs
| ETF | ISIN | TER |
|---|---|---|
| iShares Core MSCI EM IMI (Acc) | IE00BKM4GZ66 | 0.18 % |
| Xtrackers MSCI EM (Acc) | IE00BTJRMP35 | 0.18 % |
| Vanguard FTSE EM (Dist) | IE00B3VVMM84 | 0.22 % |
Two separate ETFs (World + EM) need to be brought back to 70/30 occasionally, otherwise the weighting drifts. Anyone who shies away from this effort is better off with a FTSE All-World — there the index handles the weighting automatically.
FAQ — Emerging markets in your portfolio
Do I have to have emerging markets in my portfolio?
No, it is not mandatory. With a FTSE All-World they are included anyway at around 10 %. A separate EM ETF only makes sense if you want to weight them deliberately higher than market capitalisation dictates.
What does the 70/30 strategy mean?
70 % in an MSCI World (developed markets) and 30 % in an emerging-markets ETF. This way you weight emerging markets considerably higher than their market share — a deliberate bet on more growth at higher volatility.
Are emerging markets riskier?
Yes, they fluctuate more and carry political as well as currency risks, above all because of the high China weighting. In return there are growth and valuation opportunities. That is why they are seen as an addition, not a foundation.
FTSE All-World or MSCI World + EM separately?
The FTSE All-World is more convenient (everything in one ETF, automatic weighting). The World + EM combination gives you control over the EM share, but requires occasional rebalancing. Both are solid.
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