Different International Sector Weights

When you invest in emerging market indices and in non-US developed market indices, you are exposing your portfolio not only to different sales and earnings growth rates, but also to different industrial sectors.

The table, based on the S&P/Citigroup Global Broad Market Indices, shows the ratio of free-float market-cap of the GICS (Global Industrial Classification System) sectors in the emerging markets versus those of the developed markets, excluding the US market.

In total, the emerging markets provide a lot more Telecom and Energy, and a lot less Health Care and Consumer Discretionary, for example.

The broad emerging markets are represented by exchange traded funds such as EEM from Barclay’s and VWO from Vanguard.

The non-US developed markets are represented by exchange traded funds such as EFA from Barclay’s and VEA from Vanguard, in combination with EWC from Barclay’s, which tracks Canada.

Note the the EFA and VEA products track the MSCI/Barra Europe Australasia and Far East Index, which does not include Canada.  EFA + EWC or VEA + EWC will cover the developed world excluding the US (see prior article for relative Canada and EAFE weights).

Comments

[ETF Investor:]

Excellent analysis Richard. Keep up the good posting, I like to see your breakdown of the numbers.

2008 Jun 26 12:07 PM