- Global and S&P 500 tracker funds are heavily weighted to US tech stocks
- If you have substantial exposure to these it might be sensible to diversify your US equity exposure
- Funds targeting other sectors and smaller companies are ways to do this
Despite their categorisation, ‘global’ funds that track global equity indices are mainly invested in US large-cap companies. For example, US equities accounted for 70 per cent of the MSCI World Index at the end of October, and the index's three largest components were Apple (US:AAPL), Microsoft (US:MSFT) and Amazon.com (US:AMZN). And these three, along with four other technology related megacap companies – Nvidia (US:NVDA), Alphabet (US:GOOGL) Tesla (US:TSLA) and Meta (US:META) – account for over a quarter of the S&P 500 index at the moment.
So if you have a substantial amount invested in a global or S&P 500 tracker fund or are thinking of adding to US exposure on top of these positions, consider diversifying via exposure to other parts of the market and economy. The US market has been one of the strongest regional performers in 2023, but this has been very much driven by the so called ‘magnificent seven’ stocks listed above, all of which have also performed very well over the past decade.