Geritz is particularly keen on India. Besides featuring a rapidly expanding middle class, the country boasts more than its share of companies with conservative balance sheets and experienced managers, she says.

Many holdings in the fund provide basic products for the new generation of consumers. A favorite stock is Colgate-Palmolive (India) ( ( COLGATE.BO). India is still a poor country, and consumers are just starting to buy toothpaste, says Geritz. She says that Colgate is the market leader with a strong distribution system. "The company can grow 15% to 20% annually for years to come," she says.

Another holding is Bata India ( BATA.BO), a shoe retailer with 1,200 stores. Geritz says the chain can grow rapidly as it takes market share from small competitors.

Geritz is also investing in stock exchanges in emerging markets. These are typically monopolies that are recording growing profits as trading volumes increase. Holdings include JSE ( JSEJF.PK), which operates the Johannesburg Stock Exchange in South Africa, and Bolsa Mexicana ( BOLSAA.MX), the Mexican exchange.

Another solid fund is DFA Emerging Markets Small Cap, which has returned 19.6% annually during the past 10 years, outdoing 98% of diversified emerging-market funds. The DFA fund buys stocks with market capitalizations of less than $2.3 billion. The fund is sold through financial advisers.

ETF investors can try S&P Emerging Markets Small Cap ( EWX), which has returned 20.5% in the past year, outdoing 45% of peers. Another ETF option is WisdomTree Emerging Markets SmallCap Dividend ( DGS), which has returned 9.0% annually during the past three years, outdoing 99% of peers.

For a limited dose of smaller stocks, consider Causeway Emerging Markets ( CEMVX), which buys stocks of all sizes. The fund has 35% of assets in small- and mid-cap stocks. During the past three years, the fund has lost 0.8% annually, outdoing 70% of peers.

Using a quantitative system, the Causeway portfolio managers favor unloved stocks with improving earnings. "For us, the ideal stock is reporting growing earnings, and the earnings are projected to continue growing," says portfolio manager Arjun Jayaraman.

A holding is Gazprom ( OGZPY.PK), a Russian natural gas producer. With investors worried about the stability of Russian capitalism, the stock has a P/E of 5. Jayaraman concedes that Russian stocks can be risky, but he argues the market is cheap. "We prefer names where the risk has already been discounted," he says.

Another holding is Great Wall Motor Company ( GWLLF.PK), a fast-growing Chinese car maker. Sales climbed 77% in the last quarter, but the stock has a P/E of only 14.

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Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.

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