The cost of limiting your portfolio to the UK
Having a bias towards British firms can cause investors to settle for inferior returns. James Connington looks at the numbers
Investors are naturally biased to their home market, but those who don’t venture overseas are limiting their investment returns, according to figures calculated by Telegraph Money. A typical investor holds around 26pc of their portfolio in Londonlisted stocks, despite Britain accounting for only 7pc of global stock markets, according to investment firm Vanguard. Some savers will be far more dependent on the UK than that.
Many large British firms derive sizeable proportions of their income from overseas, but investing in shares globally has still proven a huge advantage over five, 10 and 15-year time frames.
Using data service FE Analytics, we compared the returns of four indices:
FTSE 100, representing Britain’s 100 largest companies;
FTSE All Share, a broader representation of the UK market, including mid-sized and smaller companies;
FTSE All World Developed, representing a number of developed markets in North America, Europe, Asia and Australasia;
FTSE All World, representing a wide range of global markets, including developed and emerging nations.
For all three time periods, the FTSE All World index had the greatest total return by a significant margin. At the end of 15 years, it returned 330pc, compared with 204pc for the FTSE 100 and 237pc for the FTSE All Share.
Over 10 years, the FTSE All World returned 153pc, compared with 79pc for the All Share and 72pc for the FTSE 100.
Exposure to the US, which accounts for more than half of the global stock market by company values, and has