The cost of lim­it­ing your port­fo­lio to the UK

The Daily Telegraph - Your Money - - YOUR MONEY -

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


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