How to invest in global equity funds

We'll explain what global equities are, along with their main characteristics.

Investing in Global Equity means investing in the stocks of the world's leading companies in developed countries.

They are the largest companies in the 23 developed countries worldwide, engaged in different types of activities. Some examples are: Apple, Microsoft, Amazon, Facebook, Exxon, Nestle, Roche...*

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How my investment generates returns

My returns increase if:

  • The companies' profits are rising globally.
  • Expectations rise (investors believe that the companies will improve their future profits, they will buy more shares and this will increase their price).
  • The euro loses value against the other currencies*.

My returns decrease if:

  • The companies' profits are dropping globally.
  • Expectations fall (investors believe that the future profits of companies will be unfavorable, so they will sell the shares they have, which will lower their price).
  • The euro gains value against the other currencies*.

* In collective investment vehicles, there may be classes that hedge currencies to mitigate this risk.

To be taken into account
  • Investing in global equities provides diversification: less volatility than investing in other regions in isolation.
  • However, for investors whose base currency is the Euro, there is an exchange rate risk, which can contribute positively (if the Euro depreciates) or negatively (if it appreciates).
  • Investing in global equities is one approach for investing in U.S. equities + European equities + Japanese equities at a proportion of around 64%, 26% and 10%, respectively.

Learn more about how Global Equity works

What does investing in global equities involve?

By investing in global equities, investors obtain a return that is related to the profits and the expectations of globally listed companies in developed countries.

What is the most widely used Global Equity index and how is it constructed?

The index most frequently used by the asset management industry as a reference for investing in Global Equity is MSCI World. It is weighted by market capitalization, such that the weight of each stock that comprises it is determined by the value of the company's total outstanding shares. As a result, the index consists mainly of large companies ("large caps") and, to a lesser extent, medium-sized companies ("mid caps").

The index consists of around 1,600 companies in 23 developed countries all over the world (Germany, Australia, Austria, Belgium, Canada, Denmark, Finland, France, Hong Kong, Netherlands, Ireland, Italy, Japan, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, United States and New Zealand).

What are the most important countries and sectors in this index?

The weights of the MSCI World index sectors and countries change over time, depending on the capitalization of companies in each country and sector at any given time. Investing in global equities is similar to investing in its three main regions, in the appropriate proportions: United States, Europe and Japan.

US Europe Japan Other
US
59%
Europe
24%
Japan
9%
Other
8%
As for the economic sectors, finance accounts for just over 18% of the index, making it the most important sector, followed by technology, with a weight of slightly over 15%. The remaining sectors are highly diversified.
Technology Industry Health Discretionary Consumption Basic Consumption Finance
Technology
14%
Industry
11%
Health
12%
Discretionary Consumption
11%
Basic Consumption
10%
Finance
18%
Energy Materials Real Estate Telcos Utilities
Energy
6%
Materials
5%
Real Estate
3%
Telcos
4%
Utilities
3%
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What are the main risks of Global Equity?

The returns from global stocks depends on the profits of the companies, their dividends and the expectations that investors have of the price, all of which can vary greatly. As a result, investing in equities should be considered from the perspective of a long-term investment. Investing at a global level brings diversification, so generally the result of such an investment is less volatile over the long term than investing in the separate regions individually. Similarly, its evolution is related more to how the world economy evolves (both positively and negatively) and it's less dependent on the evolution of a country or region in isolation.

However, for investors whose base currency is the Euro, by investing mostly in countries that do not use the Euro, a change in the Euro's value versus other currencies can contribute positively (if the Euro depreciates) or negatively (if it appreciates). To mitigate this risk, the currency can be hedged, although this has a cost that depends on the rate differential between the currencies that are being hedged**.

** In collective investment vehicles, there may be classes that hedge currencies.

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