It pays to be a global player. As the U.S. limped through a difficult recovery last year, emerging markets and international funds scored big gains for investors. Investors and analysts say that even though there will be the inevitable ups and downs for the emerging markets, they should be in every balanced portfolio. "The next five years will be an important period in which global demand — particularly from emerging markets — will be picking up. So emerging markets will be a crucial part of our portfolios," says Quincy Krosby, Prudential Financial's market strategist. "Similarly, companies selling to emerging markets from developed world indexes will be an important part of that story for decades to come," she says, while cautioning that it does not mean smooth sailing. Investors should expect the occasional selloff and volatility. "That's part of the investment landscape, but the essential thesis will remain sound for [years] to come," Krosby says.

According to Morningstar, the top 10 emerging market mutual funds notched gains of 25% and 31.2% in the 12 months ending March 31, 2011. In the same period, international investing in the developed world climbed between 28.4% and 51.4%. There were also themes that were sounded again and again among the top managers: a fondness for natural resources and the countries that have them-granted, hard to avoid in emerging markets economies-as well as for companies in the developed world that sell to emerging market consumers.

Register or login for access to this item and much more

All On Wall Street content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access