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Portfolio Gap Analysis
Portfolio Diversification
Global Diversification
Historically, international markets have not moved in unison with the U.S. market. Incorporating
both international and domestic equities into a portfolio increases diversification and can potentially
lower volatility.
While the U.S. stock market is one of the world’s largest, the U.S. accounts for less than half of the
world’s market capitalization, and this percentage continues to shrink. If you invest only in the U.S.
markets, you are only utilizing less than half of the global investment opportunities. By 2050, experts
predict the United States will account for only 17% of global market capitalization.
North America
Current 68%
Recommended 100%
Market 49%
Latin America
Current 1%
Recommended 0%
Market 2%
Europe
Current 15%
Recommended 0%
Market 26%
Africa
Current 2%
Recommended 0%
Market 2%
Asian Pacific
Current 13%
Recommended 0%
Market 22%
For effective global diversification, we recommend investment allocations that are similar to the
relative weight of each region within the global markets, with a reasonable variation based on
investment preferences and risk tolerances. The map above compares each portfolios’ exposure in
various regions of the world relative to the distribution of world market capitalization.
Data Sources: Dimensional Fund Advisors, “Global Market Breakdown” (August 2011)
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source: advisor.myadvisorcenter.com
