The diversification by country of my portfolio

In this post I will make an analysis of the diversification by country of my share portfolio. I will compare my diversification by country with the MSCI World Index just as when I made an analysis of the diversification per sector of my portfolio.

The breakdown per country of my portfolio

In the table below you can see the diversification per country of my portfolio:

Summary:

  • I’m overweighted in The Netherlands
  • I’m underweighted in The USA
  • I’m lacking exposure in Japan
  • Other countries have a deviation smaller than 5% versus the World Index
  • The Netherlands

    Shares from The Netherlands are 22,4% of my portfolio. In the MSCI World Index The Netherlands is 1,2%. The Netherlands is my home country so it’s easy for me to get enough information about Dutch companies and decide if I consider them good potential investments. The Netherlands is also the home country for many international companies.

    I have Royal Dutch Shell, ASML Lithography, Unilever and Aegon in my portfolio listed as companies from The Netherlands, but the majority of their income comes from other countries than The Netherlands. Also I have the Think AEX ETF in my portfolio. This EFT is fully invested in Dutch stocks.

    I don’t mind being overinvested in The Netherlands, but now I compared the share of Dutch stocks in my portfolio versus the MSCI World Index, I think I should reduce the share of Dutch stocks in my portfolio. I could sell the ETF and refrain from investments in Dutch stocks until I consider the share more in balance.

    The United States

    The USA is 48,8% versus 61,7% in my portfolio. I always had the idea that I’m overweighted in the USA and decided to mainly buy euro stocks for the last months of 2018, but compared with the MSCI World Index I’m underweighted. I guess this is mainly the result of being overweighted in The Netherlands.

    The positive thing of this analysis is that I have a decent number of American companies high on my watchlist. The devil in my head saying that I’m overweighted in USA and that I should buy euro stocks I now silenced by looking at the MSCI World Index.

    Japan

    I don’t have any stocks from Japan and Japan forms 8,4% of the MSCI World Index. I don’t see myself buying any Japanese stocks anytime soon. I simply don’t have enough knowledge to pick quality Japanese stocks. Softbank is top of mind as a big investor in Tech companies, but having just one company top of mind is not a solid basis to my investment decissions.

    I probably take it for granted that I’m not invested in Japan.

    Conclusion

    For the next year I will focus on slowly reducing the exposure in The Netherlands and I will add some more American stocks.

    3 thoughts on “The diversification by country of my portfolio”

    1. Great analysis, thank you for sharing. I’ll probably look somewhat similar but I would not reduce my Dutch share count. The way America is running on debt and looming crisis I think it’s a positive to have a larger part in non-US stocks.

      1. If America gets into a crisis it would probably hit non-US stocks just as hard, because of the effect on world trade.

        I also doubt if debts is just an issue for America. If I look at the Dutch housing market these days, where prices are increasing fast and where it’s now even normal to place bids above the asking price, it also looks like we are back at the years just before the financial crisis.

        Debt as percentage GDP of the Dutch government is also still well above the pre financial crisis level. Although it’s declining fast last few years. In my eyes heaving debts is not a problem if the underlying economy is strong enough to generate enough cashflow to pay the interest and as long as there are enough investors to offer the money.

    Leave a Reply

    Your email address will not be published. Required fields are marked *