The Global Market Portfolio by Doeswijk, Lam, and Swinkels represents the total investible financial market weighted by the market share of each asset.
Asset Allocation
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Asset 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.
4. The paper calls for Developed World stocks. Since the explicit goal is to model the entire market, for the purposes of backtesting I split that into 85% Dev. Wld. large caps and 15% Dev. Wld small caps to properly model the returns using my data. But when building your own portfolio, a single all-cap Developed World fund should work the same.
Author
Doeswijk, Lam, and Swinkels
The Global Market Portfolio comes from academic research co-written by the trio of Ronald Doeswijk, Trevin Lam, and Laurens Swinkels. You can read about it in their paper Historical Returns of the Market Portfolio.
Overview
Lots of index investors talk about the benefits of owning the whole market rather than picking and choosing investments. But if you peel back myopic index definitions and truly look at the big picture, what is the market? The Global Market Portfolio answers that question by following the true cap-weighted global market for all possible investments.
Several people have written about the Global Market Portfolio, but the underlying research almost invariably traces back to a set of academic papers by the trio of Ronald Doeswijk, Trevin Lam, and Laurens Swinkels who did the real legwork to gather the insane amount of data required to describe the total market as a whole. While they cover the bases in extreme detail, the fascinating thing from a portfolio perspective is that the Global Market Portfolio can be easily approximated with only 5 simple index funds. So even with the broadest-possible market coverage that may seem impossibly complex on the surface, investing in the whole world is easily attainable with minimum effort even for DIY index investors.
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Performance
Calculations use localized assets and data for the selected home country.
Comparisons
Calculations use localized assets and data for the selected home country.
Learn more about the metrics on the Portfolio Matrix page.
Alternatives
Portfolios with a similar structure or design intent
Total Stock Market — The same philosophy applied to the US stock market
Sandwich Portfolio — Similar structure with a few more funds
Classic 60-40 — Follows the single largest market rather than the entire world
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