Glossary
Emerging markets
Economies in transition to developed status, such as India and Brazil, offering higher growth with higher political and currency risk.
Emerging markets are countries whose economies and financial markets are growing toward developed-market status but still fall short on some measure, such as income per person, market openness, liquidity or investor protections. China, India, Taiwan, Brazil, Mexico, South Africa and Saudi Arabia are typical examples. Investors care because these markets hold a large and growing share of the world's population and output, yet they behave differently from US stocks.
Who decides what counts
There is no single legal definition. Index providers publish their own country classifications and review them each year, weighing economic size, foreign-ownership limits, currency convertibility and the ease of settling trades. They do not always agree: MSCI classifies South Korea as an emerging market, while FTSE Russell treats it as developed. A fund that tracks one provider's index can therefore hold a noticeably different country mix from a fund tracking another.
Risks and returns
The case for emerging markets is faster expected growth and diversification. The costs are higher volatility, political and regulatory surprises, capital controls, thinner trading and currency swings.
Concentration is another point to check. A few large countries and companies often make up a big slice of a broad emerging-markets index, so "emerging markets" can mean heavy exposure to one or two economies.