As the developed world continues to grapple with high debt loads, stubbornly high unemployment and slowing growth, the emerging world continues to move at a fast pace. Funds like the iShares MSCI Emerging Markets Index (ARCA:EEM) have become long-term portfolio must-haves as these nations continue to lead in GDP growth. That growth is translating into new found wealth and rising middle classes across the developing world. While most "modern" nations have turned their focus back to savings and balance sheet repair, many consumers in emerging markets have finally discovered the joy of spending. Tapping into these billions of debt free consumers could be one of the biggest investing themes over the next decade. For investors, thinking small could be the best ways to play it.

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Rising Incomes
Fueled by rising income levels, increased financial security and optimism over their economic futures, consumers in the emerging world are opening their wallets. An estimated 26 million people will join the ranks of the middle class every year through 2030. Over the next decade, India's middle class alone will be larger than the United States and Europe combined. Adding in the rest of the BRICs and by 2025, an additional 200 million people with an annual income over $15,000 will be brought into the world's economy.

The consumerism boom currently underway, in the emerging world, can be compared to America's post-WWII period of the 1950s and 1960s. During this time, everything from durables, household products and personal care goods saw an increase in sales. Citizens in the developing world often save as much as a third of their disposable income for retirement, healthcare and other family obligations. Adding to this is the fact that many have taken on non-agricultural employment for the first time, and then you have a recipe for higher discretionary income. That translates into increased demand for cars, electronics, jewelry and other items that would have previously been out of reach.

However, while all that new found income will benefit multinational firms like Unilever (NYSE:UN) and Heinz (NYSE:HNZ), some of the best opportunities to play this growing consumerism might be emerging market domiciled small caps. Larger firms, even emerging market ones, are more tied to the global economic cycle. Small firms represent the entrepreneurial economy and are a better direct play on domestic economic growth. The majority of emerging market small-cap firms are located within industries that provide access to local markets such as discretionary items, food, beverages and regional services.

SEE: Small Cap Research Can Have Big Impact

Accessing Emerging Market Small-Caps
With the billion plus reasons to focus on emerging market consumers, investors should seriously consider adding local developing market small caps to their portfolio. While there is no direct emerging market small-cap consumer exchange-traded fund (ETF) yet, the broad SPDR S&P Emerging Markets Small Cap (ARCA:EWX) can be used as a proxy. The fund tracks 838 different holdings and includes large weightings towards consumer based sectors. The fund charges 0.65% in expenses and yields close to 2.5%.

For those investors looking to hone their focus on the BRIC leaders, both the Market Vectors Brazil Small-Cap ETF (ARCA:BRF) and Guggenheim China Small Cap (ARCA:HAO) make ideal plays. Providing access to 230 different Chinese small caps including brewer Tsingtao Brewery (OTCBB:TSGTY) and retailer China Nepstar Drugstore (NYSE:NPD), the Guggenheim fund is a great way to tap China's focus on domestic consumption. Likewise, the BRF ETF has roughly 25% of its portfolio in consumer discretionary firms. Expenses run 0.65 and 0.70%, respectively.

SEE: Consumer Spending As A Market Indicator

The Bottom Line
For portfolios, the rise of the emerging market consumer represents a huge multi-decade long opportunity. However, instead of just focusing on large multinationals, investors may want to get small and local. Emerging market small cap stocks offer the best way to tackle this new found wealth. The previous funds, along with the iShares MSCI EM Small Cap (ARCA:EEMS), make ideal broad selections.

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At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

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