Why doesn't the emerging markets index reflect GDP growth?
"GDP being a measurement for an economy's growth and with the stock market being driven (mostly) by company profits you would expect a tight correlation between GDP growth and stock market performance. After all, a growing economy should lead to a corresponding increase in profit right? But the stock market is heavily influenced by investor mentality; irrational exuberant buying and panic selling make the stock market far more volatile than GDP ever can be. Just look at the 2001 bubble and 2008 panic sell-off for famous examples. I feel emerging markets are particularly prone to overly optimistic buying to ""get in"" on the GDP growth followed by overly pessimistic selling when politics get unfavorable. Also keep in mind that GDP measurements are all done after the fact, the growth that is reported has already happened. The stock market might have already expected the reported growth and priced it in. A final point: governments and companies in emerging markets have a reputation (sometimes deserved) of poor governance, think corruption, nepotism etc. So even if the economy grows substantially investors might not believe they can profit from the growth.  P.S. What do you base the ""no great increase"" on? Emerging markets have had a rough decade but that index would have still returned 9% annually if you held it since 2001."
"I went to Morningstar's ""Performance"" page for FUSEX (Fideltiy's S&P 500 index fund) and used the ""compare"" tool to compare it with FOSFX and FWWFX, as well as FEMKX (Fidelity Emerging Markets fund).  According to the data there, FOSFX outperformed FUSEX in 2012, FEMKX outperformed FUSED in 2010, and FWWFX outperformed FUSEX in both 2010 and 2012.  When looking at 10- and 15-year trailing returns, both FEMKX and FWWFX outperformed FUSEX. What does this mean?  It means it matters what time period you're looking at.  US stocks have been on an almost unbroken increase since early 2009.  It's not surprising that if you look at recent returns, international markets will not stack up well.  If you go back further, though, you can find periods where international funds outperformed the US; and even within recent years, there have been individual years where international funds won. As for correlation, I guess it depends what you mean by ""low"".  According to this calculator, for instance, FOSFX and FUSEX had a correlation of about 0.84 over the last 15 years.  That may seem high, but it's still lower than, say, the 0.91 correlation between FUSEX and FSLCX (Fideltiy Small Cap).  It's difficult to find truly low correlations among equity funds, since the interconnectedness of the global economy means that bull and bear markets tend to spread from one country to another.  To get lower correlations you need to look at different asset classes (e.g., bonds). So the answer is basically that some of the funds you were already looking at may be the ones you were looking for.  The trick is that no category will outperform any other over all periods.  That's exactly what volatility means --- it means the same category that overperforms in some periods will underperform in others.  If international funds always outperformed, no one would ever buy US funds.  Ultimately, if you're trying to decide on investments for yourself, you need to take all this information into account and combine it with your own personal preferences, risk tolerance, etc. Anecdotally, I recently did some simulation-based analyses of Vanguard funds using data from the past 15 years.  Over this period, Vanguard's emerging markets fund (VEIEX) comes out far ahead of US funds, and is also the least-correlated with the S&P 500.  But, again, this analysis is based only on a particular slice of time." It's important to realize that any portfolio, if sufficiently diversified should track overall GDP growth, and anything growing via a percentage per annum is going to double eventually. (A good corner-of-napkin estimate is 70/the percentage = years to double). Just looking at your numbers, if you initially put in the full $7000, an increase to $17000 after 10 years represents a return of ~9.3% per annum (to check my math $7000*1.09279^10 ≈ $17000). Since you've been putting in the $7000 over 10 years the return is going to be a bit more than that, but it's not possible to calculate based on the information given.  A return of 9.3% is not bad (some rules of thumb: inflation is about 2-4% so if you are making less than that you're losing money, and 6-10% per annum is generally what you should expect if your portfolio is tracking the market)... I wouldn't consider that rate of return to be particularly amazing, but it's not bad either, as you've done better than you would have if you had invested in an ETF tracking the market. The stock market being what it is, you can't rule out the possibility that you got lucky with your stock picks. If your portfolio was low-risk, a return of 9%ish could be considered amazing, but given that it's about 5-6 different stocks what I'd consider amazing would be a return of 15%+ (to give you something to shoot for!) Either way, for your amount of savings you're probably better off going with a mutual fund or an ETF. The return might be slightly lower, but the risk profile is also lower than you picking your stocks, since the fund/ETF will be more diversified. (and it's less work!) I feel something needs to be addressed The last 100 years have been a period of economic prosperity for the US, so it's no surprise that stocks have done so well, but is economic prosperity required for such stock growth? Two world wars. The Great Depression. The dotcom bust. The telecom bust. The cold war. Vietnam, Korea. OPEC's oil cartel. The Savings and Loans crisis. Stagflation. The Great Recession. I could go on.  While I don't fully endorse this view, I find it convincing: If the USA has managed 7% growth through all those disasters, is it really preposterous to think it may continue? Long term taxation cannot by itself surpress GDP if those same taxes are being used on goods and services. It can surpress growth, and cause a fall off if people are leaving the area or closing businesses but at some point it'll hit an equilibrium point.  GDP does include government spending after all. "Very different statement. ""There's an asset bubble/opacity in Chinese real estate and equities"" is a BIT different from ""I never trust anything coming out of China. They're all smoke and mirrors.""  China has, in fact, had rapid economic growth for decades. The fact that you are a student makes me suspect you've been taught laissez-faire ideology rather than a more historically-grounded economic analysis that includes the role of things like infrastructure projects in economic growth (the primary driver of China's boom)." "He is wrong.  Using Total Return (Reinvesting Dividend), from the peak in December 1999, it only took 6 years to recover.   You can check the data for free here. Make sure you choose ""Gross Index Level"".  ACWI Index is Developed Markets + Emerging Markets.  World Index is Developed Markets only." Bloomberg Commodity Index is one you check out. [link](https://www.bloomberg.com/quote/BCOM:IND)      Oil does have a heavier weighting though (around 20% through Brent and WTI iirc) so while things like aluminium, gold, corn etc are up for the year BCOM is down YTD. Still a decent broad-based index for you to consider. "Morningstar is often considered a trusted industry standard when it comes to rating mutual funds and ETFs.  They offer the same data-centric information for other investments as well, such as individual stocks and bonds.  You can consult Morningstar directly if you like, but any established broker will usually provide you with Morningstar's ratings for the products it is trying to sell to you. Vanguard offers a few Emerging Markets stock and bond funds, some actively managed, some index funds.  Other investment management companies (Fidelity, Schwab, etc.) presumably do as well.  You could start by looking in Morningstar (or on the individual companies' websites) to find what the similarities and differences are among these funds.  That can help answer some important questions: I personally just shove a certain percentage of my portfolio into non-US stocks and bonds, and of that allocation a certain fraction goes into ""established"" economies and a certain fraction into ""emerging"" ones.  I do all this with just a few basic index funds, because the indices make sense (to me) and index funds cost very little." &gt; So what’s the problem? When investors put their money in an index like the S&amp;P 500, they believe that they are just investing in “the market”, broadly. But now, these for-profit indices have made an active decision to exclude certain stocks on the basis of their voting structures.   The author doesn't seem to understand the difference between the companies creating the passive funds that track the indices and the companies creating the indices that are being tracked. Indices have always been subject to somewhat arbitrary rules for what is being included and how its value is calculated. So this article is completely missing the point. "The June 2014 issue of Barclays Wealth's Compass magazine had a very nice succinct article on this topic: ""Value investing – does a rules-based approach work?"".  It examines the performance of value and growth styles of investment in the MSCI World and S&P500 arenas for a few decades back, and reveals a surprisingly complicated picture, depending on sector, region and time-period. Their summary is basically: A closer look however shows that the overall success of value   strategies derives mainly from the 1970s and 1980s. ... in the US, value has underperformed growth for over 25 years   since peaking in July 1988. Globally, value experienced a 30% setback   in the late 1990s so that there are now periods with a length of   nearly 13 years over which growth has outperformed. So the answer to ""does it beat the market?"" is  ""it depends..."". Update in response to comment below: the question of risk adjusted returns is interesting.  To quote another couple of fragments from the piece: Since December 1974, [MSCI world] value has outperformed growth by   2.6% annually, with lower risk. This outperformance on a risk-adjusted   basis is the so-called value premium that Eugene Fama and Kenneth   French first identified in 1992... and That outperformance has, however, come with more risk. Historical   volatility of the pure style indices has been 21-22% compared to 16%   for the market. ... From a maximum drawdown perspective, the 69% drop   of pure value during the financial crisis exceeded the 51% drop of the   overall market." I believe you're looking for some sort of formula that will determine how changes in savings, investing, and spending will affect economic growth.  If such a formula existed (and worked) then central planning would work since a couple of people could pull some levers to encourage more savings, or more investing, or more spending - depending on what was needed at that particular time.  Unfortunately, no magic formula exists and so no person has enough knowledge to determine what the proper amount of savings, investing, or spending should be at a given time. I found this resource particular helpful in describing the interactions between savings, consumption, and investing. I'm not sure I'm following what you said. GDP PPP standardizes prices across countries to better compare how much is produced in each country. So 2 Big Macs sold at a low price in china results in a lower GDP than 1 expensive Big Mac in the US. Although with GDP PPP, china would have the bigger figure after adjusting for price differences since it produces more. First of all, Mezz lending is, in my opinion, the riskiest piece of the capital stack. It has all the drawbacks of debt with none of the benefits of equity. You can be rest assured, when shit goes south, the market goes  through the mezz about as fast as you can blink. They are the most marginal piece of the capital stack and only seem to appear in red hot markets (which, is to say, late stage markets).  Also, this article defines terms and talks about economic macro metrics like that somehow informs the reader that the Chinese Real estate market is a good investment. Yes, GDP growth informs rent growth and overall demand but that like saying GDP growth increases corporate earning. No duh. That doesn't tell me if the the cap rate already prices in that growth or what if the pipeline of development is overbuilt.   Not to mention, investing in another market, in the most speculative risk curve of an alternative asset with no liquidity or legal recourse. Yeah, no.   edit: and current exchange risk. GDP growth is one of several components of nominal equity returns; the (probably not comprehensive) list includes:  Real GDP/earnings growth  Inflation  Dividend payouts and share buybacks  Multiple expansion (the market willing to pay more per dollar of earnings)  Changes in interest rate expectations  As other comments mention you could also see larger companies tending to deliver higher returns as for any number of reasons related to M&amp;A, expansion into foreign markets, etc. The value premium would state the opposite in fact if one looks at the work of Fama and French. The Investment Entertainment Pricing Theory (INEPT) shows a graph with the rates on small-cap/large-cap and growth/value combinations that may be of interest as well for another article noting the same research. Index fund advisors in Figure 9-1 shows various historical returns up to 2012 that may also be useful here for those wanting more detailed data. How to Beat the Benchmark is from 1998 that could be interesting to read about index funds and beating the index in a simpler way.