How much of your retirement portfolio should you allocate to emerging market equities?
“Very little” is the answer provided for years by many retirement planners. One argument they’ve made is that the combined market cap of emerging market equities only makes up about 15% of the global total, so a 60:40 portfolio appropriate to many retirees would default to allocating just 9% to emerging market equities. And, given their greater risk, due to things such as trade wars and the like, many advisers argued that even this 9% was too high.
And over the last decade, these advisers and their clients were well rewarded for avoiding emerging market equities: U.S. stocks doubled their annualized return. But might the tide now be turning?