Excessive American Investments Across the Portfolio?
In the ever-changing world of investments, Goldman Sachs has highlighted the potential risks associated with a high concentration in US stocks today. According to Peter Oppenheimer, head of macro research in Europe at Goldman Sachs Research, an overreliance on US stocks could lead to significant risks.
The MSCI World, a widely-used global equity index, has a staggering 71.4% share of US companies. This dominance can be seen in individual portfolios as well, with the recent rally in stocks like Nvidia and Microsoft strengthening the US chunk in many portfolios today.
To mitigate this risk, Goldman Sachs recommends diversification strategies. One such strategy is geographic diversification, which can be achieved by investing in emerging markets, developed non-US markets, and regions with lower correlation to the US stock market today.
For those seeking to add emerging markets to their portfolio, the iShares Core MSCI EM IMI UCITS ETF (WKN: A111X9) could be a suitable choice. This ETF provides a simple and efficient way to gain exposure to emerging markets.
For a more diversified geographically-focused portfolio, the L&G Gerd Kommer Multifactor Equity UCITS ETF (WKN: WELT0B) could be a solution. This ETF limits the weighting of a country and an individual title in the ETF to 50% and 1%, respectively, ensuring a well-diversified portfolio.
In addition, the iShares Core MSCI Europe UCITS ETF (WKN: A0MZWQ) offers a way to add European stocks to a portfolio, providing another layer of diversification.
By diversifying a portfolio beyond US stocks today, investors can potentially reduce the risks associated with higher valuations and lack of diversification. It's a strategy worth considering for a more balanced and resilient investment portfolio.
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