While we are on the subject of portfolio diversification, these charts show that investing offshore can provide not only geographical variety but sector diversity. Financials comprise 38 per cent of the local S&P;/ASX 200, with materials counting for another 17 per cent and property 8 per cent. Head over to the US market and the S&P; 500 benchmark is a different story. The biggest constituent of the index is IT, followed by financials, healthcare and discretionary consumer stocks. Indeed, two of the biggest three companies in the US, Apple and Microsoft, are in the information technology universe, while the third largest, Exxon Mobil, is an an energy behemoth. Of the two biggest financial stocks, only one, JP Morgan Chases, is a bank. The other is investment conglomerate Berkshire Hathaway.
In Australia, IT shares make up just 1.2 per cent of the benchmark index.
As an aside, this week Smart Investor chatted to Willie Watt, chief executive of global fund manager Martin Currie, who warned investors not to get overly carried away by the potential economic uplift from President Donald Trump's agenda. Implementing the agenda could take a couple of years, and the impact of any infrastructure programs on the economy could take a few more years after that, given the need to develop and actually get projects underway. As a result, energy and financial stocks, which have lead the recent US stockmarket rally are unlikely to maintain their "leadership" role. In Europe, although earnings are starting to improve, share prices will be hampered by political uncertainty, argues Watt.
