And what’s MUCH better ….
If you follow the markets bulletin on the news, the first thing they show is how the FTSE100 did. Like the rolling ticker on Sky News which updates us on the the FTSE every other minute.
As a reminder, the FTSE100 is an index to represent the top 100 stocks listed in the UK stock market.
However from an investment viewpoint, the FTSE is almost irrelevant.
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Here’s why:
1. Global Diversification
A key benefit of stock investing is to get global diversification – to reduce risk from any single country.
The UK’s weighting in the global stockmarket is only 4%. On a global basis, the FTSE is literally insignificant.
We may think the UK is a stable country but, remember, that’s how Japan seemed just before the collapse of its economy and stockmarket in the early 90s.
I’m not saying the UK is about to implode but investing is always safer when diversified.
2. The FTSE doesn’t even represent the UK economy
Around 80% of revenues from the FTSE100 companies come from outside the UK.
Moreover, the FTSE’s industry breakdown is not the same as the UK economy.
FTSE100 Sector breakdown % ….
By contrast, the UK economy’s top 3 industries are: Real Estate, Retail and Manufacturing.
3. The FTSE is boring!
You can see from the chart that the FTSE is largely an “old economy” market.
There isn’t much in high-growth “new economy” sectors such as Ai, Technology, Alternative Transportation, Robotics that exist in the markets in Asia and the US.
How to invest instead?
As I mentioned, diversification is the key to safer long term investing. That means having a properly diversified portfolio across different countries, sectors and stocks.
Nowadays, that is pretty straightforward with low-cost globally diversified funds and ETFs, some of which include thousands of stocks from around the world.
These funds are automatically diversified and rebalanced for you. So you can simply set-and-forget.
In summary, it’s far better to go global. Don’t build your portfolio with individual stocks or single countries – UK or US.
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Always Remember:
- Time in the Markets always beats timing the markets
- Stay Diversified
- Minimise those leakages: Fees, Inflation, and Taxes
- Financial Markets are a great source of recurring income
- ETFs, Balanced Funds and Options achieve all the above
- Being educated helps you outperform 99% of the population
… to ensure your investments work for YOUR financial freedom (not someone else’s)
And …
For more guidance, our Investment Academy will help you implement all of this in a step-by-step way.
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Finally …
– Don’t take the above as advice as it may not apply to you personally
– Your Capital is at Risk
– You may not be covered by the FSCS
– Anything mentioned in a podcast or in a previous article was valid at that time and may not continue to be now
