{"id":5842,"date":"2015-05-12T06:02:10","date_gmt":"2015-05-12T13:02:10","guid":{"rendered":"http:\/\/blog.paladinregistry.com\/?p=5842"},"modified":"2015-06-01T13:45:18","modified_gmt":"2015-06-01T20:45:18","slug":"tools-to-construct-global-equity-portfolios","status":"publish","type":"post","link":"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/","title":{"rendered":"Tools to Construct Global Equity Portfolios"},"content":{"rendered":"<p>It is a global market with many investors seeking global diversification. In the following I offer guidance on global equity market asset allocation. <strong><span style=\"color: #0000ff;\"><a href=\"http:\/\/www.cfapubs.org\/doi\/pdf\/10.2469\/dig.v30.n3.722\" target=\"_blank\" rel=\"nofollow\"><span style=\"color: #0000ff;\">Asset allocation explains more than 100% of total portfolio performance<\/span><\/a> <\/span><\/strong>because timing and selection tend to subtract value.\u00a0 Optimal diversification is achieved by allocating to each equity market proportionately to its outstanding capitalization as shown in the pie chart below. Anything other than a market weight is a bet, either for or against a particular market.<a href=\"http:\/\/blog.paladinregistry.com\/wp-content\/uploads\/2015\/05\/global-economies.png\"><img loading=\"lazy\" decoding=\"async\" width=\"300\" height=\"265\" class=\"alignright size-medium wp-image-5845\" src=\"http:\/\/blog.paladinregistry.com\/wp-content\/uploads\/2015\/05\/global-economies-300x265.png\" alt=\"global economies\" srcset=\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/global-economies-300x265.png 300w, https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/global-economies.png 613w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>The total world market comprises 25,000 companies worth $70 trillion. The U.S. is the largest market at $27 trillion, which is 39% of the total. Most U.S. investors hold more than 39% U.S. in their global equity portfolios, and this bet has paid off in the last 5 years because the U.S. stock market has far outperformed most other stock markets. You can decide whether you expect this to continue.<\/p>\n<p>&nbsp;<\/p>\n<p>With this pie chart, you can decide which countries you want to over- or under-weight. You might want to fundamentally weight, which means using something other than capitalization to guide your allocations. For example, the following performance report for the year-to-date through April, 2015 shows that equal weighting countries would have added 220 basis points (9.17% versus 6.96%).<\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"http:\/\/blog.paladinregistry.com\/wp-content\/uploads\/2015\/05\/global-economies-return.png\"><img loading=\"lazy\" decoding=\"async\" width=\"686\" height=\"343\" class=\"aligncenter size-full wp-image-5847\" src=\"http:\/\/blog.paladinregistry.com\/wp-content\/uploads\/2015\/05\/global-economies-return.png\" alt=\"global economies return\" srcset=\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/global-economies-return.png 686w, https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/global-economies-return-300x150.png 300w, https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/global-economies-return-620x310.png 620w\" sizes=\"(max-width: 686px) 100vw, 686px\" \/><\/a><\/p>\n<p><strong>An alternative perspective<a href=\"http:\/\/blog.paladinregistry.com\/wp-content\/uploads\/2015\/05\/sector-diversification.png\"><img loading=\"lazy\" decoding=\"async\" width=\"300\" height=\"284\" class=\"alignright size-medium wp-image-5848\" src=\"http:\/\/blog.paladinregistry.com\/wp-content\/uploads\/2015\/05\/sector-diversification-300x284.png\" alt=\"sector diversification\" srcset=\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/sector-diversification-300x284.png 300w, https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/sector-diversification.png 553w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><\/a><\/strong><\/p>\n<p>Some have argued that sector diversification is more important than country diversification, so I provide the Global sector pie chart on the right. You can use this as a second order diversification tool: (1) decide on your country bets, (2) allocate to sectors according to their market weights.<\/p>\n<p>&nbsp;<\/p>\n<p>As with country allocations, you can decide to fundamentally weight within sectors. For example, the following Y-T-D performance report shows that equal-weighting sectors would have added 71 basis points (7.67% minus 6.96%).<\/p>\n<p><a href=\"http:\/\/blog.paladinregistry.com\/wp-content\/uploads\/2015\/05\/sector-diversification-return.png\"><img loading=\"lazy\" decoding=\"async\" width=\"751\" height=\"349\" class=\"aligncenter size-full wp-image-5849\" src=\"http:\/\/blog.paladinregistry.com\/wp-content\/uploads\/2015\/05\/sector-diversification-return.png\" alt=\"sector diversification return\" srcset=\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/sector-diversification-return.png 751w, https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/sector-diversification-return-300x139.png 300w\" sizes=\"(max-width: 751px) 100vw, 751px\" \/><\/a><\/p>\n<p><strong>Conclusion<\/strong><\/p>\n<p>There\u2019s more to global diversification than simply holding some non-U.S. stocks. Asset allocation is king, so the allocations to foreign countries and foreign economic sectors matter a lot. The charts above provide a road map for optimal allocation. You can decide when and where you want to go off-road.<\/p>\n<p><em><strong style=\"font-weight: bold;\">To learn more about Ron Surz, visit\u00a0<span style=\"color: #0000ff;\"><a style=\"font-weight: bold; color: #222222;\" href=\"http:\/\/ppca-inc.com\/\" target=\"_blank\" rel=\"nofollow\"><span style=\"color: #0000ff;\">PPCA, Inc.<\/span><\/a><\/span><\/strong><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>It is a global market with many investors seeking global diversification. In the following I offer guidance on global equity market asset allocation. Asset allocation explains more than 100% of total portfolio performance because timing and selection tend to subtract value.\u00a0 Optimal diversification is achieved by allocating to each equity market proportionately to its outstanding capitalization as shown in the pie chart below. Anything other than a market weight is<\/p>\n","protected":false},"author":40,"featured_media":5854,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[395],"tags":[],"class_list":["post-5842","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Tools to Construct Global Equity Portfolios<\/title>\n<meta name=\"description\" content=\"It is a global market with many investors seeking global diversification. In the following I offer guidance on global equity market asset allocation.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Tools to Construct Global Equity Portfolios\" \/>\n<meta property=\"og:description\" content=\"It is a global market with many investors seeking global diversification. In the following I offer guidance on global equity market asset allocation.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/\" \/>\n<meta property=\"og:site_name\" content=\"Paladin Registry Blog\" \/>\n<meta property=\"article:published_time\" content=\"2015-05-12T13:02:10+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2015-06-01T20:45:18+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/global-equity-portfolios.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"620\" \/>\n\t<meta property=\"og:image:height\" content=\"360\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Ron Surz\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@RonSurz\" \/>\n<meta name=\"twitter:site\" content=\"@PaladinRegistry\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Ron Surz\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/\",\"url\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/\",\"name\":\"Tools to Construct Global Equity Portfolios\",\"isPartOf\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/global-equity-portfolios.jpg\",\"datePublished\":\"2015-05-12T13:02:10+00:00\",\"dateModified\":\"2015-06-01T20:45:18+00:00\",\"author\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/6bf0c2620b3323d78eb421dbf27faf88\"},\"description\":\"It is a global market with many investors seeking global diversification. In the following I offer guidance on global equity market asset allocation.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/#primaryimage\",\"url\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/global-equity-portfolios.jpg\",\"contentUrl\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/global-equity-portfolios.jpg\",\"width\":620,\"height\":360,\"caption\":\"Tools to Construct Global Equity Portfolios\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.paladinregistry.com\/blog\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Investing\",\"item\":\"https:\/\/www.paladinregistry.com\/blog\/category\/investing\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Tools to Construct Global Equity Portfolios\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#website\",\"url\":\"https:\/\/www.paladinregistry.com\/blog\/\",\"name\":\"Paladin Registry Blog\",\"description\":\"Helping You Make Better Financial Decisions\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.paladinregistry.com\/blog\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/6bf0c2620b3323d78eb421dbf27faf88\",\"name\":\"Ron Surz\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/05\/Ron-Surz1-96x96.jpg\",\"contentUrl\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/05\/Ron-Surz1-96x96.jpg\",\"caption\":\"Ron Surz\"},\"description\":\"Ron Surz is the president of PPCA Inc and its wholly owned subsidiary Target Date Solutions. He is a pension consulting veteran, having started with A.G. Becker in the 1970's. Ron earned an MBA in Finance at the University of Chicago and an MS in Applied Mathematics at the University of Illinois, and holds a CIMA (Certified Investment Management Analyst) designation. He has published regularly in such publications as The Journal of Wealth Management, The Journal of Investing, Journal of Portfolio Management, Pensions &amp; Investments, Senior Consultant, HorsesMouth and the IMCA Monitor, as well as contributed to and edited several books. Ron\u2019s most recent co-authored book is the \u201cFiduciary Handbook for Understanding and Selecting Target Date Funds.\u201d\",\"sameAs\":[\"http:\/\/www.targetdatesolutions.com\",\"https:\/\/www.linkedin.com\/profile\/view?trk=tyah&locale=en_US&id=11979428\",\"https:\/\/x.com\/RonSurz\"],\"url\":\"https:\/\/www.paladinregistry.com\/blog\/author\/ron-surz\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Tools to Construct Global Equity Portfolios","description":"It is a global market with many investors seeking global diversification. In the following I offer guidance on global equity market asset allocation.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/","og_locale":"en_US","og_type":"article","og_title":"Tools to Construct Global Equity Portfolios","og_description":"It is a global market with many investors seeking global diversification. In the following I offer guidance on global equity market asset allocation.","og_url":"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/","og_site_name":"Paladin Registry Blog","article_published_time":"2015-05-12T13:02:10+00:00","article_modified_time":"2015-06-01T20:45:18+00:00","og_image":[{"width":620,"height":360,"url":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/global-equity-portfolios.jpg","type":"image\/jpeg"}],"author":"Ron Surz","twitter_card":"summary_large_image","twitter_creator":"@RonSurz","twitter_site":"@PaladinRegistry","twitter_misc":{"Written by":"Ron Surz","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/","url":"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/","name":"Tools to Construct Global Equity Portfolios","isPartOf":{"@id":"https:\/\/www.paladinregistry.com\/blog\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/#primaryimage"},"image":{"@id":"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/#primaryimage"},"thumbnailUrl":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/global-equity-portfolios.jpg","datePublished":"2015-05-12T13:02:10+00:00","dateModified":"2015-06-01T20:45:18+00:00","author":{"@id":"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/6bf0c2620b3323d78eb421dbf27faf88"},"description":"It is a global market with many investors seeking global diversification. In the following I offer guidance on global equity market asset allocation.","breadcrumb":{"@id":"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/#primaryimage","url":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/global-equity-portfolios.jpg","contentUrl":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2015\/05\/global-equity-portfolios.jpg","width":620,"height":360,"caption":"Tools to Construct Global Equity Portfolios"},{"@type":"BreadcrumbList","@id":"https:\/\/www.paladinregistry.com\/blog\/investing\/tools-to-construct-global-equity-portfolios\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.paladinregistry.com\/blog\/"},{"@type":"ListItem","position":2,"name":"Investing","item":"https:\/\/www.paladinregistry.com\/blog\/category\/investing\/"},{"@type":"ListItem","position":3,"name":"Tools to Construct Global Equity Portfolios"}]},{"@type":"WebSite","@id":"https:\/\/www.paladinregistry.com\/blog\/#website","url":"https:\/\/www.paladinregistry.com\/blog\/","name":"Paladin Registry Blog","description":"Helping You Make Better Financial Decisions","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.paladinregistry.com\/blog\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/6bf0c2620b3323d78eb421dbf27faf88","name":"Ron Surz","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/image\/","url":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/05\/Ron-Surz1-96x96.jpg","contentUrl":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/05\/Ron-Surz1-96x96.jpg","caption":"Ron Surz"},"description":"Ron Surz is the president of PPCA Inc and its wholly owned subsidiary Target Date Solutions. He is a pension consulting veteran, having started with A.G. Becker in the 1970's. Ron earned an MBA in Finance at the University of Chicago and an MS in Applied Mathematics at the University of Illinois, and holds a CIMA (Certified Investment Management Analyst) designation. He has published regularly in such publications as The Journal of Wealth Management, The Journal of Investing, Journal of Portfolio Management, Pensions &amp; Investments, Senior Consultant, HorsesMouth and the IMCA Monitor, as well as contributed to and edited several books. Ron\u2019s most recent co-authored book is the \u201cFiduciary Handbook for Understanding and Selecting Target Date Funds.\u201d","sameAs":["http:\/\/www.targetdatesolutions.com","https:\/\/www.linkedin.com\/profile\/view?trk=tyah&locale=en_US&id=11979428","https:\/\/x.com\/RonSurz"],"url":"https:\/\/www.paladinregistry.com\/blog\/author\/ron-surz\/"}]}},"_links":{"self":[{"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/posts\/5842"}],"collection":[{"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/users\/40"}],"replies":[{"embeddable":true,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/comments?post=5842"}],"version-history":[{"count":10,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/posts\/5842\/revisions"}],"predecessor-version":[{"id":5961,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/posts\/5842\/revisions\/5961"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/media\/5854"}],"wp:attachment":[{"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/media?parent=5842"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/categories?post=5842"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/tags?post=5842"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}