Goldilocks fist11/23/2023 ![]() While this is certainly not pleasant for these particular companies and their employees, it fuels the overall system's ability to emerge stronger from crises in terms of equity returns. ![]() The equation can be simplified to explain that there are continuously individual companies unable to achieve high returns on equity, resulting in their facing the harsh verdict of extinction. It's an economic system that has displayed remarkable resilience throughout history. ![]() In this context, the concept of antifragility and the inherent functioning of a capitalist system come into play.Ĭapitalism, as we know it, thrives on dynamism and adaptability. It's not merely about spreading investments across an array of assets it's about capturing the collective strength of global economic forces. To truly embrace the essence of investing in the world, diversification must take center stage. Yet, with such a high concentration in a handful of behemoth companies, are we inadvertently making predictions about the future? Which effectively means that we are loading up on risk instead of mitigating it as much as possible? The Quest for True Diversification The essence of risk-free investing, at its core, aims to avoid making assumptions about the future. This concentration might not hold the same weight when viewed through the lens of earnings rather than mere market capitalization. The fundamental concept of diversification, in the context of investing in the world and capturing its average returns while mitigating risk, appears to erode under the weight of this market cap-weighted ETF and its concentration in a few select companies. While acknowledging the merits of the size and significance of these companies, we must also recognize the profound impact of this concentration. ![]() Notably, Apple ( AAPL) and Microsoft ( MSFT) combined account for 10% of the holdings, followed by corporate giants within this ETF, such as Amazon ( AMZN), Tesla ( TSLA), Alphabet ( GOOGL), and Nvidia ( NVDA) - companies often regarded as fundamental components of the digital age and therefore highly successful. This ETF boasts approximately 1,200 holdings, but it's critical to consider the top holdings, which wield a disproportionate influence, making up about 20% alone. The Composition of URTH MSCI World ETF - The Concentration ProblemĮnter the URTH MSCI World ETF, a widely recognized fund designed to mirror the performance of the MSCI World Index. However, in an era characterized by growing market concentration and individual companies reaching market valuations in the trillions of dollars, it is imperative to reevaluate whether this traditional investment approach can still be effectively realized through instruments like the iShares MSCI World ETF. This approach promised a tangible, risk-free path to earning returns from the collective endeavors of companies worldwide. The original concept behind investing in an MSCI World Index seemed to offer a solution to this quest: capturing the returns of every economic entity across the globe, or more preciously, the average Return on Equity (ROE) of the global economy. IShares MSCI World ETF ( NYSEARCA: URTH): In today's fast-paced world of finance, the pursuit of a truly diversified and as close to a risk-free investment strategy as possible remains a desirable plan for many.
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