Where to invest in global equities?

There is a big world out there, with lots of investment opportunities. We thought we would share a few facts with you.

Clients sometimes ask me why we tend to invest largely in developed markets when there can be some exciting investment opportunities in emerging markets.

When you invest in global shares, you are not investing in economies, land masses or populations, you are investing in companies and 88% (£50 trillion) of the World's companies are considered to be developed markets. 12% (£7 trillion)are considered to be emerging markets.

Emerging markets come with extra risks such as political risk. We think it is best to minimise exposure to emerging markets and just invest in the remaining 88% of the World stock-markets.

We are also asked why we heavily invest in the USA. The US stock-market makes up 60% of the total market by market capitalisation. Most of the great companies of the World are based there. Apple on its own makes up 3% of World equity market capitalisation. This is larger than most countries. The whole of the Chinese stock-market makes up only 4%. So we invest where we consider the best, risk-adjusted opportunities are.

Another question we get is why we do not invest more heavily in the UK. Well, the UK makes up only 4% as well ( it used to be 11%). There is a name for having too much invested in your own country. It is called home bias and should be avoided (unless you are American!). So why restrict yourself to only 4% of the investment opportunities out there, when the World is your oyster?

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