In today’s interconnected era, investors are discovering that domestic markets alone no longer suffice for building resilient portfolios. While home-country securities once formed the bulk of many strategies, rising global uncertainty, shifting trade patterns and the rapid growth of nontraditional asset classes demand a broader perspective. By exploring international equities, emerging-market debt, intangible capital and digital infrastructure, investors can position themselves to capture growth that transcends borders and economic cycles.

The Macro Backdrop: Beyond Home Markets

Global foreign direct investment (FDI) fell 11% to $1.5 trillion in 2024, marking a second consecutive decline and signaling more selective cross-border capital flows. At the same time, the United States remained the world’s largest beneficiary, with FDI reaching $5.7 trillion at year-end 2024, up 30% since 2019. Meanwhile, global trade surged to nearly $33 trillion, driven by services and developing economies. These numbers underscore the need to rethink the limitations and risks of home bias.

Trade fragmentation, tariffs and geopolitical blocs are fragmenting traditional supply chains and reshaping economic alliances. Investors who confine themselves to domestic indices risk missing opportunities in fast-growing regions. We are witnessing the rise of multi-polar markets—the U.S., Europe, China/Asia and key emerging areas—each with distinct economic drivers, valuations and policy regimes. This complex environment elevates the value of global opportunity sets over a purely domestic focus.

• Slowing FDI and shifting capital flows
• Heightened geopolitical and trade uncertainty
• Emergence of multiple economic power centers

The Case for Global Diversification

Long-term studies, such as those in the Global Investment Returns Yearbook 2025, reassert the power of diversification across regions and asset classes as the most reliable way to reduce portfolio volatility. As U.S. equities have delivered exceptional returns in recent years, valuations have become stretched relative to non-U.S. markets. By incorporating international equities, emerging-market small caps and alternative strategies, investors can enhance risk-adjusted returns and capture cyclical leadership shifts.

Emerging Markets as a Central Pillar

Emerging-market (EM) equities have rallied strongly, up about 5.7% year-to-date in 2025, supported by stronger earnings, a softer U.S. dollar and robust demand for geographic diversification. EM valuations traded at a 20-year low relative to the S&P 500 at the end of 2024, making them increasingly attractive. Analysts forecast MSCI EM earnings growth of 17% in 2025 versus 10% in 2024, while the EM–developed markets growth gap remains a healthy 2.5%.

However, broad EM exposure conceals significant country dispersion. Poland is up over 35% year-to-date, while Thailand is down nearly 12%, even as the overall EM index gains 5.7%. In 2025, South Korea soared roughly 61% and China around 37%, reflecting concentrated leadership. Renewed inflows—$38.9 billion so far in 2025—underscore growing investor interest, but they also highlight the importance of selectivity, not just buying a broad EM index.

Emerging markets benefit from several macro tailwinds: a weakening U.S. dollar, a 90-day tariff pause between Washington and Beijing, domestic reforms in India and accommodative central banks. Yet risks remain, including potential trade-policy reversals, political instability and policy shocks in major EM economies.

Intangible and Digital Investment: A New Global Asset Reality

Intangible investment—covering software, R&D, data, branding and organizational capital—reached $7.6 trillion across 27 major economies in 2024, outpacing tangible investment’s $5.13 trillion. Since 1995, intangibles more than doubled in real terms (+143%), compared with +32% for tangibles. This rapid shift highlights the rise of IP-rich firms and sectors, and it points to the benefits of tilting equity strategies toward companies that invest heavily in innovation.

Country breakdowns reveal that the U.S. leads with $4.7 trillion of intangible investment—nearly twice the combined total of France, Germany, the U.K. and Japan. France, however, recorded over 5% growth in 2024, surpassing other leading economies. Sweden tops the list on intangible intensity (investment as a share of GDP), while India shows the fastest growth trajectory.

Beyond traditional intangibles, digital infrastructure and fintech are transforming emerging markets. Mobile internet, e-commerce and digital payments are enabling rapid growth in Southeast Asia, Africa and India, a phenomenon described as digital transformation across EM. In Africa, countries like Nigeria and Kenya lead fintech innovation, bringing millions into formal financial systems and creating new investment themes.

Building a Global Portfolio Framework

Successfully expanding your universe requires a structured approach. Begin by defining target allocations by region and asset class, calibrating exposures to your risk tolerance and return objectives. Use tools such as global ETFs, multi-asset mutual funds and currency-hedged products to implement strategies cost-effectively. Regularly rebalance to maintain discipline and capitalize on valuation shifts across markets.

• Geographic diversification with core and satellite holdings
• Balancing equities, fixed income and alternatives
• Risk management via currency overlay and hedging
• Leveraging multi-asset funds for diversified exposure

At its heart, going global is about broadening your lens to capture the full spectrum of opportunity. It demands research, patience and a willingness to think beyond familiar indexes. But by embracing a truly international mindset, investors can build more resilient, higher-performing portfolios that stand the test of time.