Page 39 - DIY Investor Magazine | Issue 40

TOP 10 MSCI WORLD CONSTITUENTS
Granted, over 65% of the MSCI World index now tracks US companies, but US concentration concerns neglect the fact that its stock market is the most diversified in the world. Moreover, many US firms are huge global players that earn more than half of their profits in the rest of the world.
Finally, if you decide to diverge from the global market consensus, you have to ask yourself what you know that the world’s biggest financial players do not.
EMERGING MARKETS
You can take diversification one step further by investing in an ETF that tracks the MSCI All-Country World Index (MSCI ACWI). This index adds 24 Emerging Market countries, including China, to the MSCI World universe.
Emerging Markets are characterised by greater volatility than their developed-world counterparts but are also expected to deliver greater growth in the long term.
The MSCI ACWI index is just over 11% in Emerging Markets which enables more risk-averse investors to enjoy the benefits of greater diversification and the potential for stronger growth while keeping the bulk of their investments in developed markets.
Of course, many investors like to refine their strategy with single- country ETFs as they grow in experience and confidence.
That approach can yield strong results if you make the right picks, but you should feel no pressure to go down this road.
In fact, a World Index ETF is a key building block that earns its place in any investor’s portfolio – especially if you’re looking for a solid start point and don’t want to spend time juggling multiple equity funds.
Published by our friends at:
Company
MICROSOFT CORP
APPLE
NVIDIA
Market capitalisation (float-adj., in USD billions)
2,919.59
2,825.89
1,954.07
Index weighting in %
4.6
4.46
3.08
Sector
Information Technology Information Technology Information Technology Consumer Discretionary Communication Services Communication Services Communication Services
Health Care
Information Technology Consumer Discretionary
39
April 2024
DIY Investor Magazine ·
AMAZON.COM
1,641.39 2.59
META PLATFORMS A
ALPHABET A
ALPHABET C
LILLY (ELI) & COMPANY
BROADCOM
TESLA
Total
1,089.35
1.72
821.48 1.3
729.78 1.15
608.15
577.14
0.96
0.91
576.69 0.91
13,743.51 21.67
Source: MSCI World; as of 02/04/2024
‘IF YOU DECIDE TO DIVERGE FROM THE GLOBAL MARKET CONSENSUS, YOU HAVE TO ASK YOURSELF WHAT YOU KNOW THAT THE WORLD’S BIGGEST FINANCIAL PLAYERS DO NOT’
By comparison, the FTSE 100’s top 5 account for 31% of the entire index, exposing investors to concentration risk; huge Footsie players like HSBC, Shell or BP have been rocked by large and unexpected difficulties in the recent past.
A world index also guards against home bias: the common investing mistake of overweighting your own country in your portfolio due to the inbuilt human habit of confusing familiarity with safety.
With home bias, your portfolio and other sources of income,
like your job, become tied to the same risk - your home country being hit hard by economic turmoil – but by contrast, a globally diversified portfolio can act as a hedge against trouble at home. When the pound plunged after the Brexit vote, globally diversified UK investors watched the value of their portfolio soar as their dollar and euro-denominated investments appreciated.