Which % of the global economy is considered “emerging”?
The company that runs the fund (Vanguard) on their website has the information on the general breakdown of their investments of that fund. They tell you that as of July 31st 2016 it is 8.7% emerging markets. They even specifically list the 7000+ companies they have purchased stocks in. Of course the actual investment and percentages could [change every day]. Vanguard may publish on this Site, in the fund's holdings on the   webpages, a detailed list of the securities (aggregated by issuer for   money market funds) held in a Vanguard fund (portfolio holdings) as of   the most recent calendar-quarter-end, 30 days after the end of the   calendar quarter, except for Vanguard Market Neutral Fund (60 calendar   days after the end of the calendar quarter), Vanguard index funds (15   calendar days after the end of the month), and Vanguard Money Market   Funds (within five [5] business days after the last business day of   the preceding month). Except with respect to Vanguard Money Market   Funds, Vanguard may exclude any portion of these portfolio holdings   from publication on this Site when deemed in the best interest of the   fund.
"The answer to your question depends very much on your definition of ""long-term"". Because let's make something clear: an investment horizon of three to six months is not long term. And you need to consider the length of time from when an ""emergency"" develops until you will need to tap into the money. Emergencies almost by definition are unplanned. When talking about investment risk, the real word that should be used is volatility. Stocks aren't inherently riskier than bonds issued by the same company. They are likely to be a more volatile instrument, however. This means that while stocks can easily gain 15-20 percent or more in a year if you are lucky (as a holder), they can also easily lose just as much (which is good if you are looking to buy, unless the loss is precipitated by significantly weaker fundamentals such as earning lookout). Most of the time stocks rebound and regain lost valuation, but this can take some time. If you have to sell during that period, then you lose money. The purpose of an emergency fund is generally to be liquid, easily accessible without penalties, stable in value, and provide a cushion against potentially large, unplanned expenses. If you live on your own, have good insurance, rent your home, don't have any major household (or other) items that might break and require immediate replacement or repair, then just looking at your emergency fund in terms of months of normal outlay makes sense. If you own your home, have dependents, lack insurance and have major possessions which you need, then you need to factor those risks into deciding how large an emergency fund you might need, and perhaps consider not just normal outlays but also some exceptional situations. What if the refrigerator and water heater breaks down at the same time that something breaks a few windows, for example? What if you also need to make an emergency trip near the same time because a relative becomes seriously ill? Notice that the purpose of the emergency fund is specifically not to generate significant interest or dividend income. Since it needs to be stable in value (not depreciate) and liquid, an emergency fund will tend towards lower-risk and thus lower-yield investments, the extreme being cash or the for many more practical option of a savings account. Account forms geared toward retirement savings tend to not be particularly liquid. Sure, you can usually swap out one investment vehicle for another, but you can't easily withdraw your money without significant penalties if at all. Bonds are generally more stable in value than stocks, which is a good thing for a longer-term portion of an emergency fund. Just make sure that you are able to withdraw the money with short notice without significant penalties, and pick bonds issued by stable companies (or a fund of investment-grade bonds). However, in the present investment climate, this means that you are looking at returns not significantly better than those of a high-yield savings account while taking on a certain amount of additional risk. Bonds today can easily have a place if you have to pick some form of investment vehicle, but if you have the option of keeping the cash in a high-yield savings account, that might actually be a better option. Any stock market investments should be seen as investments rather than a safety net. Hopefully they will grow over time, but it is perfectly possible that they will lose value. If what triggers your financial emergency is anything more than local, it is certainly possible to have that same trigger cause a decline in the stock market. Money that you need for regular expenses, even unplanned ones, should not be in investments. Thus, you first decide how large an emergency fund you need based on your particular situation. Then, you build up that amount of money in a savings vehicle rather than an investment vehicle. Once you have the emergency fund in savings, then by all means continue to put the same amount of money into investments instead. Just make sure to, if you tap into the emergency fund, replenish it as quickly as possible." "This may sound very ""tongue in cheek"", but the best thing you can invest in is to raise your income in order to increase your retirement savings.  How much are you able to contribute to retirement now?  I think you would be lucky to do $150/month and most months probably less than that.  However, if you were making like 60k/year, and allowed a little lifestyle bloat, you could probably easy put away 20k/year.  Once you are able to do that the savings you can manage now will be quickly eclipsed.   Often times when people consider ""having their money work for them"" they often neglect to factor risk.  Prior to investing one should have a proper emergency fund in place.  That is 6 months or so of living expenses in a nice safe savings account.  Those earn about 1.25% these days, which is pretty meager, but it does earn something.   Once the emergency fund is in place, one can invest with impunity.  Without it, you will have to liquidate investments if economic calamity strikes you.  This could be done at a loss furthering the harm done by the calamity.   Increase your income and create an emergency fund.  Do those things first." "It's likely that the main reason is the additional currency risk for non-USD investments. A wider diversification in general lowers risk, but that has to be balanced by the risk incurred when investing abroad.  This implies that the key factor isn't so much the country of residence,  but the currency of the listing. Euro funds can invest across the whole Euro zone. Things become more complex when you consider countries whose currency is less trusted and whose economy is less diversified. In those cases, the ""currency risk""  may be more due to the national currency, which justifies a more global investment strategy." Japan  has huge current account, trade surplus and shrinking population/consumption,  Unless they print money, Yen will shoot up, creating problem with their export economy. Japan can only wish the rest of the planet dump their currency, lowering yen and enhancing export. Yen is not a major reserve currency. So there is that.  Does it apply to US? probably not, US is deficit and debt economy.  Dollar is reserve currency, creating artificial demand and pumping US economy.   Once that privilege is gone, dollar global purchasing power will tank.  So toying with dollar credibility like Japan printing Yen is not really an option. &gt;mid-sized resource-based economies  From Wikipedia:  [Australia](https://en.wikipedia.org/wiki/Economy_of_Australia):  &gt;The Australian economy is dominated by its service sector, representing 68% of GDP.  [Canada](https://en.wikipedia.org/wiki/Economy_of_Canada):  &gt;As with other developed nations, the Canadian economy is dominated by the service industry, which employs about three quarters of Canadians.  I'm no economist, but wouldn't that make these two service-based? But aren't there more people in every year doing more work?  That is growth.  Yes, the economy cannot continue to grow forever given that the Earth is a finite resource.  It's not clear to me we are anywhere near that point where we run out of resources. Don't try because it's a moving target. A thriving economy on paper can be entirely valuation based. It tells you nothing about distribution of wealth in the economy. The majority would be destitute and we could still be talking of booming times if speculative markets can find creative ways of growing valuations of existing assets with credi growth. All that is needed is for two people to bid a painting to 100 million for the painting to have contributed positively to a growth in the value of goods and services in the economy. The same is done with intellectual property and corporate valuations. Good times are times when capital gains can be seized on account of expansionin of credit or government spending. Recessions are closer when governments try and pull in more than they spend and when lending can't expand. Government spending is increaasing these days despite talk of the contrary. That goodness here in Australia we don't annualise GDP figures rrom just on individual quarter. That is such a stupid practice. We state the quarterly figure and then add the previous three quarters to calculate the rolling 12 month figure. Makes so much more sense.