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The global economic center of gravity has shifted: from industrial to emerging markets. Two thirds of all goods and services produced worldwide – worth some $111 billion in 20241 – come from emerging or developing markets.
This shouldn’t be surprising. 160 emerging economies are up against 63 industrial (or developed) economies. Even so, a lot of investor portfolios focus mostly on developed economies like the United States or Europe2.
However, with emerging markets no longer on the sidelines, shouldn’t they become a bigger part of investment strategies?
What makes a market ‘emerging’?
Emerging markets are countries that have grown beyond being considered a ‘developing nation’, but have not yet reached the level of an industrialised economy.
These countries often share certain characteristics. These include above-average economic growth rates, increasing industrialisation, and rising living standards. This is often due to growing demand, investment projects like infrastructure development, and high population growth.
They also often differ from industrialised countries in terms of their demographic structure3. For example, the median age in the UK is 414, while in India—one of the largest emerging markets—it is just 30, a young population that drives consumption and growth5.
The most economically significant emerging markets include China, India and Brazil. Each has followed a different path – from low-cost manufacturing hubs to technology-driven economies6.
What makes these markets worth considering?
Many investors’ portfolios focus mostly on developed markets. So, adding an emerging market into the mix can help to create a more balanced portfolio.
This is diversification, which simply means spreading your investments across different assets, regions, or sectors. The idea is that, when one area underperforms, another may hold steady or rise, helping to balance your overall returns.
As emerging markets can experience different economic cycles to developed economies, they may help smooth out your portfolio’s performance over time.
Beyond diversification, emerging markets can offer significant growth potential. According to the International Monetary Fund, emerging and developing economies are expected to grow by around 4% in 2026, compared to just 1.6% for developed economies7.
Where there are opportunities, there are also risks
Of course, there are also risks to consider before investing. Stocks from emerging markets can also go through periods of poor performance.
Also, unlike with many industrialised countries, there are political risks associated with emerging markets which can be difficult to assess in advance.
Currency crises and economic upheavals can also happen, which can shake the capital markets in a country – a fairly recent example would be the crisis in Turkey in 2018.
Regulatory interventions, like those seen in China with the technology sector, can also put pressure on local share prices.
All in all, stocks from emerging markets are often more volatile. Then, you have to consider currency risk: even if a stock rises in local currency, if that currency devalues against the pound, it can wipe out gains for UK investors.
However, for long-term investors, some of these risks may matter less as short-term fluctuations tend to balance out over longer periods of time.
So how do you invest via ETFs?
Exchange-traded funds, or ETFs, offer a straightforward way to invest in emerging markets. An ETF is a fund that tracks an index, being representative for a region or theme and trades on a stock exchange, just like a share.
A broad emerging markets ETF – such as one tracking the MSCI Emerging Markets Index – can give you exposure to more than a thousand companies across multiple countries and sectors in one single investment.
This diversification across different stocks can help to spread your risk within the scope of emerging markets – at low costs.
Conclusion
Emerging markets make up a significant portion of the global economy. Despite this, they remain underrepresented in many portfolios. They offer diversification and access to fast growing economies, but can also come with higher volatility and possible political risks.
For long-term investors, emerging markets ETFs can provide a simple and cost-effective way to gain exposure to the dynamic markets.
You can find several Xtrackers by DWS products focused on emerging markets here at InvestEngine.
This content is in paid partnership with Xtrackers by DWS. Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.
This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.
Tax treatment depends on personal circumstances and is subject to change, and past performance is not a reliable indicator of future returns.
1Trading Economics, 2025, World GDP, retrieved December 18, 2025: https://tradingeconomics.com/world/gdp
2Deutsche Börse, 2024, “The superfluous fixation on MSCI World ETFs”, retrieved at January 5, 2026: https://live.deutsche-boerse.com/nachrichten/the-superfluous-fixation-on-msci-world-etfs
3S&P Global, 2024, Which emerging markets will climb the income ladder?, retrieved at 26th November 2025: https://www.spglobal.com/en/research-insights/special-reports/look-forward/which-emerging-markets-will-climb-the-income-ladder
4Population Pyramids, 2025, retrieved December 16, 2025. https://www.populationpyramids.org/united-kingdom
5CIA, 2025, Country Comparisons – Median age, retrieved at 18th December 2025: https://www.cia.gov/the-world-factbook/field/median-age/country-comparison/
6S&P Global, 2024, Which emerging markets will climb the income ladder?, retrieved at 26th November 2025: https://www.spglobal.com/en/research-insights/special-reports/look-forward/which-emerging-markets-will-climb-the-income-ladder
7IMF, 2025, Real GDP growth, retrieved at 24th March: https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD/MEQ
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An investment in an Xtrackers ETF may not be suitable for all investors. Xtrackers UCITS ETFs are not capital protected; therefore investors should be prepared and able to sustain losses up to the total loss of the capital invested.
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