What a crazy world we live in. A new market index has been launched that measures the impact of US President Donald Trump's tweets on global asset markets.
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The brainchild of US investment bank JP Morgan, the 'Volfefe' index is so-named by a combination of 'volatility' and 'covfefe' - a mystery word that many believe to be a spelling mistake, used in one of Trumps 2017 tweets.
The index gauges the effect of the President's tweets on the US bond market. Happily, it turns out his comments have only a minor impact.
It's all a bit tongue in cheek, though it does highlight how Trump has drawn attention to global asset markets. Maybe that's not a bad thing.
As an investor, it can be tempting to focus on home turf, and overlook opportunities that lie offshore. While there's a lot to be said for investing in something you understand, there are drawbacks to focusing on the Australian share market.
The Aussie stock market is heavily concentrated in a few industries. If you want to invest in financial stocks or the resource sector, you certainly won't have a problem.
One-third of ASX 200 companies operate in the finance sector. Almost 20 per cent of listed companies are in mining and resources. That's close to half the market in just two industries.
The world is a big place, and 98 per cent of global shares are found outside Australia. Moreover, international share markets offer a far wider variety of industries, bringing valuable diversity to a portfolio. The MSCI World ex-Australia Index confirms the breadth of industries that are available when you think globally.
Digitisation and artificial intelligence are radically reshaping our world. So it's no surprise that tech companies like Microsoft, Apple, Facebook, and Alphabet are among the world's 10 biggest listed stocks. In fact, the tech sector accounts for 17 per cent of global share markets. Yet here in Australia, the IT industry makes up just 2.5 per cent of the share market.
Another of the world's top 10 listed companies is Johnson & Johnson - a major player in the global pharmaceutical industry, a sector where there is slim pickings in the Aussie market. It's a similar story with industries like aerospace.
Sure, international shares offer geographic diversity and a chance to get a slice of the action in growing regions like Asia. However, diversifying your portfolio by industry and sector is just as important. A good selection of exchange traded funds with a global focus are listed on the Australian Stock Exchange, and they offer a world of opportunity at very low cost for investors.