Investing in a global index is often viewed as a ‘catch all’ strategy. It can be a useful solution to the complexities of choosing where to invest your money, and means you can spread your eggs across different regional baskets.
Except, when it comes to many of the popular global indices, some baskets will end up much heavier than the others. In fact, for the MSCI World Index, 72.9% of the assets are in the United States, while the UK makes up a more meagre 3.6%.
So why is an investment strategy that’s supposed to represent the world so favoured towards one country? Mostly, this comes down to the individual company. In the case of the MSCI World, the weighting of a company is determined by the value of the company, also known as its market cap. This means that Apple, which is just one of the 1,395 constituents of the index, accounts for 5% of the weighting. The top ten constituents, which are all American companies, together account for 24.2% of the index*.
Not all indices have this same balance. FTSE has its own series of global equity indices, which includes the FTSE All World. This has 4,244 constituents, with a 64% weighting to the US**. It still makes its general weightings based on the market cap of companies, but because it has slightly different parameters for what is included in the index, the make-up can change quite significantly.
No method is necessarily the ‘right’ one, but the indices can have differing returns. In the five years to the end of 2024, the MSCI World Index returned 76.3%, while the FTSE All World reached 69.35%. In 2024, the FTSE All World gained 20% to the MSCI World’s 21%***.
So, sometimes it looks like a heavy weighting towards a large market works well. But so far this year, we’ve seen a different story. The US has struggled, including some of its largest names. Apple, which is such a significant portion of the MSCI World, has been sliding down, and because it has such a heavy weighting in the index, this will more heavily impact the performance of the index.
But the weightings of an index aren’t static. Each index has a slightly different policy, but the MSCI World rebalances quarterly, meaning it can change the weight of companies depending on where their market cap stands. If there’s a major event in the market, they can also have an emergency rebalance. So, while the weighting is now heavily skewed towards the US, that would change if companies that are listed there started to lose value.
There are also other solutions for those who are nervous about holding too much in one place. Many indices offer an equal weighting version, which is composed of all the same stocks that would be in the standard index, but gives them all an equal percentage of the assets instead of valuing based on market cap.
It’s also important to remember that a heavy weighting towards one country doesn’t always mean the investment is entirely reliant on that country or its economy. It’s important to consider what a company being associated with a country really means. Sometimes, that can just mean the company is listed there, even if most of their business is in a different country, or multiple different countries.
This has been a very relevant topic for luxury goods producer LVMH, home to brands including Louis Vuitton, Marc Jacobs and Tag Heuer. The company is listed in France, on Euronext Paris. But France is home to just 8% of its revenue, while Japan accounts for 9%, and the rest of Asia makes up 28%. So, the success of the company is not necessarily linked to its home market.
But if you’re specifically looking to exclude a certain country, indices will sometimes make versions where they simply exclude them. This is seen often in emerging markets, where you’ll see funds that are ‘Asia ex-Japan’ or ‘ex-China’. Investments that are index trackers can often offer access to a broad scope of the market, but it’s still important to have a handle on what that scope entails to make sure it’s right for your portfolio and for you.
*Source: MSCI World March 31 2025 Factsheet
**Source: FTSE All World March 31 2025 Factsheet
***Source: FE fundinfo
Written by:
Hannah Williford
Content Writer
Hannah joined AJ Bell in 2025 as an investment writer. She was previously a journalist at Portfolio Adviser Magazine, reporting on multi-asset, fixed income and equity funds, as well as macroeconomic impacts and regulatory changes within the industry.
Hannah earned a degree in journalism from the University of Texas at Austin before beginning her career in London. Before joining the finance industry, she covered state politics in Texas and worked as a sports reporter.
Ways to help you invest your money
Put your money to work with our range of investment accounts. Choose from ISAs, pensions, and more.
Let us give you a hand choosing investments. From managed funds to favourite picks, we’re here to help.
Our investment experts share their knowledge on how to keep your money working hard.