DELHI, INDIA—Traffic in India's capital city is intense. Modestly powered three-wheel "tuk-tuk" taxis compete daily for space on streets crowded with trucks crammed full of passengers, motorcycles with small children sandwiched between their parents, standing-room-only buses, and sleek new luxury cars.

Since horn-honking is considered a safety measure for passing (trucks have signs on their bumpers that read "please honk"), the blaring noise is overwhelming.

This is the sound of an emerging market economy that, while it may not always turn in 9 percent gross domestic product growth, seems destined to put up at least 5 percent annually thanks to demographics and an improving living standard.

A clear beneficiary of all this is Tata Motors Ltd. (TTM on the NYSE), the country's largest automobile manufacturer, whose American Depositary shares rose 72 percent in 2010 following their 279 percent rise in 2009.

This company of 24,000 employees that was established in 1945 has placed millions of its cars and trucks on India's roads. In 2008, it acquired Jaguar-Land Rover from Ford for $2.3 billion and launched its own Tata Nano, known as the People's Car.

"India is definitely a good story in the long run, and the only real issue there is that investors are currently paying too much for its growth," says Arjun Jayaraman, portfolio manager of Causeway Emerging Markets Investor Fund (CEMVX) in Los Angeles. "We own shares of Tata Motors because it benefits from the fact that the middle income group is getting wealthier and buying cars."

In Russia, on the other hand, widespread worry about risk has depressed the prices of many Russian stocks, even though company earnings are robust, he says. Booming economic results in emerging markets, as developed markets try to pull themselves out of the recession, likely will be the continuing scenario of 2011.

Emerging markets mutual funds were up 17 percent in 2010, according to Lipper Inc., with a five-year annualized return of 10 percent and 10-year annualized return of 15 percent. While the average U.S. diversified equity fund was also up 17 percent in 2010, its five-year and 10-year annualized returns are each a meager 3 percent.

"The emerging markets group is growing faster than the developed markets, but you need broad diversification because the leadership changes year to year," says Jayaraman, whose fund was up 24 percent in 2010. "For example, small-country markets such as Indonesia, Thailand, and Chile did better than the BRIC (Brazil, Russia, India, and China) countries during 2010."

Some of his Causeway fund's largest holdings are South Korea's Samsung Electronics Co. Ltd., China Mobile Ltd. (traded here as CHL, an American Depositary Receipt), Russian natural gas producer OAO Gazprom (OGZPY.PK, an ADR), Polish copper and silver producer KGHM Polska Miedz S.A., Indian aluminum and copper producer Hindalco Industries Ltd., and Brazilian diversified mining company Vale S.A. (VALE, an ADR).

"We're looking for 6.2 percent gross domestic product growth in the emerging markets in 2011 versus 2 percent for the developed markets," says Alec Young, international equity strategist with Standard & Poor's Corp. in New York. "While the specifics change from one country to the next every year, the common theme in this asset class is faster secular growth."

Urbanization in emerging nations is driving the need for items such as consumer goods, infrastructure, savings accounts, mortgages, appliances, and cosmetics, says Young. Demographically, there is a good ratio of workers to retirees in these nations, while government debt and consumer debt are lower than in the developed countries.

"The risk that will give emerging markets modest—rather than explosive—gains is the prospect of inflation, most notably in China, India, Brazil, and Indonesia where central banks are starting to raise interest rates," says Young. "However, we believe the central banks in these countries will raise rates enough to keep inflation under control, yet not enough to kill growth."

Young likes Vanguard Emerging Markets Stock Index Fund (VEIEX). It gained 16 percent in 2010, with a five-year annualized return of 12 percent and 10-year annualized return of 15 percent.

Diversification in regions also makes sense. For example, one of the best ways to invest in China is by investing in the rising Asian countries that surround it, say some experts.

"You want the trading partners with China that are not necessarily heavy in basic materials, but technology," says Gary Gordon, president of Pacific Park Financial in Aliso Viejo, Calif. "You can accomplish this with the exchange-traded fund iShares MSCI All Country Asia ex Japan (AAXJ)."

Investors shouldn't take the risk of selecting individual countries whose events they won't be able to follow closely, Gordon warns.

Among broad-based emerging market ETFs, Global X China Consumer ETF (CHIQ) is a way to play consumer goods and services in the region, he says. To obtain exposure to countries such as Chile and Colombia, the iShares S&P Latin America 40 Index (ILF) is his preference.

If an investor considers such investments a bit too risky, another strategy is to invest in big, developed companies with a significant toehold in emerging markets, he said.

Gordon's examples are consumer staples companies such as Unilever NV (UN), Yum! Brands Inc. (YUM), and PepsiCo Inc. (PEP).