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A recent Federal Reserve report makes a convincing case for investing in global emerging market stocks and emerging market funds.

The Federal Reserve study reports that American families lost 39% of their household net worth from 2007 to 2010, mostly due to falling home values.

Over the same three years, emerging market funds such as SPDR S&P Emerging Markets ( GMM , quote ) and iShares MSCI Emerging Markets ( EEM , quote ) have risen.

As U.S. real estate values collapsed in the Great Recession, growth in global emerging market countries continued. Growth is now falling in China and India, but it is still more than double that of the United States and the euro zone. Emerging market funds devoted to China and India will benefit from their growth.

This trend is likely to continue. Emerging market nations are sitting on lots of assets while developed countries are in debt. China has the most foreign exchange reserves -- over $3 trillion -- of any nation. The United States Federal Reserve has over $3 trillion in assets too, but that's due to inflating its balance sheet.

Emerging markets to invest in for long-term growth

The bills always come due in the end. Sovereign debt has to be serviced. The funds must come from tax increases and/or spending cutbacks. When debt loads are so huge that reductions in government spending can't address them, it's clear that household wealth will continue to drop as taxes rise. The developed nations will dig themselves deeper, while the emerging nations and their emerging market funds will continue to prosper.

The dollars paid to service a nation's debt will leave the country at the mercy of its bondholders. For the United States, that will be China. This will make it difficult for U.S. household wealth to recover from its current 1992 levels. Meanwhile, the emerging market funds keep rising.

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