Global Equity Portfolio: Definition & Strategies

Instructor: Artem Cheprasov
This lesson defines global equity portfolio. You'll differentiate it from an international equity portfolio before going over some important considerations related to the former.

What Is a Portfolio?

Portfolios are collections of investments held by an entity. These portfolios can be vastly different from one another with respect to their diversification and focus. Some portfolios may be composed largely of blue chip stocks. Others? Perhaps index funds, or commodities, or a mix of any of that.

One specific kind of portfolio bases it diversification framework on countries. Let's take a look at it.

Global Equity Portfolio

A global equity portfolio is one that includes both foreign and domestic investments. Thus, for U.S. investors, the components of a global equity portfolio may include shares in a U.S. company, like IBM, but also shares of foreign firms.

Contrast the global equity portfolio with the international equity portfolio, which is comprised of only foreign investments.

Investment Strategies

There are numerous strategies that a global equity portfolio can employ. The following are some of the more important considerations with respect to these strategies:

  1. What is each investor's or fund manager's risk tolerance?
  2. What percentage of the portfolio should be focused on the U.S. versus other nations and their securities?
  3. Which types of markets should be focused on? For instance, developed or emerging?
  4. Is the fund going to focus on small companies or large ones?
  5. How might currency fluctuations affect the investments?
  6. How will macroeconomic, political, military, or social unrest affect the investments from each region and/or security?

Let's go over a couple of basic examples of global equity portfolios.

Let's say that John is a risk-averse investor. What type of global equity portfolio might be best for John? Securities from developed nations, such as the U.S., U.K., and Australia are probably a good choice. These are politically and economically stable nations (relatively speaking) with little sustained threat of significant political, military, or social unrest that might adversely affect an underlying security or market as a whole.

Furthermore, investments in these markets should probably focus on large companies, which are more stable and less likely to fluctuate significantly in price compared with smaller companies that are, potentially, just startups with unproven track records.

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