Among financial advisors, recommended allocations to emerging markets stocks tend to be modest. You might put 10 percent of your equities into this asset class, which includes Asian and Latin American stocks. For example, if you have a 60 percent-40 percent allocation, stocks to bonds, you might have 6 percent of your overall portfolio in emerging markets stocks.
Savvy investors rebalance actively. Recently, emerging markets have underperformed. Thus, if you now have only 3 percent or 4 percent of your portfolio there, you might add to your holdings, bringing the allocation back to 6 percent. Some major institutional investors have been buying as lower prices have brought emerging markets allocations below target levels.
Emerging markets stocks may be difficult to buy directly so you probably should invest through a fund. Morningstar’s "analyst picks" in this category are American Funds New World Fund and T. Rowe Price Emerging Markets Fund.
