In many instances, that remains the case today. But it’s not necessarily true. Finland set the marker back in 2000, when Nokia turned into 70% of the Helsinki stock market by value1.
The dotcom bust that followed resolved the situation. But this event did demonstrate the capacity indices have of becoming unintended risk concentration zones.
Today, the US accounts for a mindboggling 70% of the MSCI World Index and 62% of the MSCI All Countries World Index2. Investing in a fund tracking either of these or any similar index essentially means investing in America.
The US stock market itself, in spite of its immense size, has fallen victim to risk concentration. The now familiar “Magnificent Seven” – America’s technology mega caps – have become so large and valuable they serve as an imperfect proxy for the entire S&P 500.
Source : Fidelity