Comparing the Sector Composition of Emerging and Developed Market Indices

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I came across the following table showing the sector weightings in the MSCI Emerging Markets Index and select developed market indices:

 

 

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Note: The data shown above are as of Dec, 2016. So the weightings may have changed since then.

Some of the high-level observations from the above are:

  • Canada’s TSX Composite index is heavily concentrated in financials followed by energy and materials.
  • Emerging markets are also dominated by Financials. On the other hand the US index has about 15% in financials.
  • The tech sector accounts for about one-fifth of the S&P 500 but the EAFE and TSX indices have low tech sector weightings. It is surprising that the sector is the 2nd largest sector in the emerging markets index.

Source: The Case for Emerging Markets, Connor, Clark & Lunn Financial Group

Going Abroad Can Reduce Equity Risk And Boost Returns: Infographic

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Investing in foreign stocks offer many advantages such as a wide universe of stocks to choose, higher dividend yields in some markets, different earnings growth rates and potential high growth opportunities, etc. The following infographic shows some of the beneits of going overseas:

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Source: Global Vision Enhances Equity Insight by Mark Phelps, Scott Krauthamer, Alliance Bernstein

The Most Innovative Country in the World is also a Developing Country

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The most innovative country in the world is neither a developed European country or the US. Based on a study by Ana Maria Santacreu at the St.Louis Fed, China leads the world in innovation based on the number of patent applications filed by year:

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Source: Chart of the Day: The Most Innovative Country in the World Is…, Canadian Investment Review

S&P 500 Sector Returns by Year from 2007 Thru 1H, 2017

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Diversification is the simple and easy way to avoid major disasters and achieve one’s long-term goal in equity investment. The following chart vividly makes this point clear.At the height of the global financial crisis, the S&P 500 fell 37% in 2008 but the consumer staples index declined by only 15%. Similarly no index has been the consistent top performer year after year. So investors have to diversify their assets across sectors if holding individual stocks or ETFs or go with a S&P 500 ETF that gives exposure to all the sectors.

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Source: Novel Investor

Related ETFs:

  • SPDR S&P 500 ETF (SPY)

Disclosure: No Positions