Adapting your investment strategy with exchange traded funds (ETFs) is important when economies around the world are becoming more interrelated.
Doing so will add value and increase the chance of outperforming benchmarks, reports Carl Delfeld for Index Universe. The wheres of a company is also becoming less important as the industries and sectors which it operates is taking center stage.
The basics of global indexing, says Delfeld, are take the S&P Global 1200, a composite of seven indexes that represent leaders in their respective regions. The market values of the 1200 companies in the indexes represent around 70% of the world’s capital markets with a market value of $28 trillion or more. Here is a brief breakdown:
- The S&P 500 covers 75% of U.S. markets.
- The S&P Europe 350 covers 70% of the region’s market cap across 17 countries.
- S&P/TOPIX 150 covers 70% of the Japanese market.
- S&P/TSX 60 offers exposure to 60 large-cap, liquid Canadian companies.
- S&P/ASX All Australian 50 is comprised of 50 liquid, domestic-oriented Australian companies.
- S&P Asia 50 covers 50 leading companies in Asia ex-Japan domiciled in Hong Kong, South Korea, Taiwan and Singapore.
- S&P
Latin America 40 is a basket of 40 companies from Argentina, Brazil,
Chile and Mexico which offers exposure to 70% of the regions’ market
cap. It is heavily weighted to Brazil and Mexico.
By using a top-down macro analysis of studying market-cap global sector weightings, a global sector rotation method can be useful in a growth portfolio. The weakness is that smaller countries get less weighting, and the traditional market-cap weighting which gives trademark exposure to emerging markets.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.