Global Market Portfolio

The Global Market Portfolio represents the total investible worldwide financial market weighted by the market share of each asset. As the benchmark portfolio for fans of efficient markets, it’s the simplest way to avoid measurable over-concentrations in any one country or investment. The version here is a simplified and easily-investible interpretation using the data from Historical Returns of the Market Portfolio by Ronald Doeswijk, Trevin Lam, and Laurens Swinkels.

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Asset Allocation

  • 45% World Developed Stocks
  • 5% Emerging Market Stocks¹
  • 44% World Developed Intermediate Bonds²
  • 4% REITs
  • 2% Gold³

Notes

The truly free-floating Global Market Portfolio naturally shifts percentages of stocks, bonds, and other real assets every year, which makes it tricky to measure historical results and fairly compare the underlying risk to other portfolios. The percentages shown here represent the average portfolio composition since 1970, and the portfolio is rebalanced back to that average annually.

1. Allocating 10% of the stock portion (5% of the portfolio) to emerging markets is a little high in terms of historical averages, as easily investible EM stocks really didn’t become widespread until the 1990s. But since the percentage has leveled out and EM stocks are here to stay, it seems reasonable to allocate a representative portion of the portfolio to emerging markets.

2. The global market research specifically splits out separate categories for government bonds and other things like corporate, inflation-linked, and emerging market debt. I don’t have good data for every bond type, so I allocated them to government bonds of a similar average maturity. In my experience this is still a reasonable approximation for general study.

3. If you read the research, the 2% allocation is most commonly referred to as “commodities”. But dig deeper into the details, and the total invested commodities market studied has an average index weight of about 88% gold. So for both simplicity and accuracy, I allocated the full portion to gold rather than a much more diversified commodities index.

Performance

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