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This piece is written from perspective of investor in Malaysia

Global portfolio is a form diversification in term geographical (and even geopolitical)

  • Malaysia equity market is a stock picker’s market – you won’t get a positive return (let alone beat the inflation) if you simply invest in all large cap or even top 100 stocks.
    • You may refer to FTSE Bursa Malaysia Index Series report dated 30 June 2022 (link here) and see that for the past 5 years (ending June 2022) all FBM indices (KLCI, Mid 70, and Small Cap) gives between -3.7% to -4.0% annualised (compounded) on capital return
  • Going global is sensible move considering that certain key economies like US, China and India are thriving for the past decade especially when compared to other economies
  • However, focusing on any single country will put you on the country risk, plus despite interlinked market in the current globalised economy, some market react differently from others

Modern Equity Market are interlinked but there’s still value in global equity vs US alone

  • For past 15 years US market only experience 2 years of negative return and most of the positive returns are above 15% (with 5 years above 20% )
    • pic annual return select market 2006 2021.png (1301×651) (googleusercontent.com)
    • ![[pic annual return select market 2006 2021.png]]
  • During 1997 Asian Financial Crisis, US is largely unaffected, but also have (relative to others) below average return
    • Meanwhile during Global Financial Crisis (2007-2008), Malaysia and China market rebounded swiftly while US rebound is more tapered
    • pic 5-year window recession 1997 2008.png (1301×652) (googleusercontent.com)
    • ![[pic 5-year window recession 1997 2008.png]]
  • Building a global portfolio would require understanding how to allocate to achieve desired risk-reward balance. This will revolve around understanding the regional risks, allocation ratio and portfolio rebalancing. Perhaps I’ll explore this matter in another post