Looking for more opportunities

Because different stock markets tend to perform well at different times, one of the most effective ways to achieve consistent long-term investment from shares, with an acceptable level of risk, is to spread your money across a range of markets.

This strategy is known as diversification, and it increases the chance you will benefit from growth in any market that is currently doing well, while also giving greater protection against market falls.

Market selection

The world's major markets are all very different. They may be affected by the same issues, such as oil prices, environmental factors and global conflicts, but they won't necessarily react in the same way. In addition, they are influenced by their own business cycles, economic trends and political, social and cultural factors.

A portfolio that focuses on an investor's home market may produce superior results from time to time, but it is restricted in its ability to capitalize on the enormous investment potential available around the world. Ultimately, it may struggle to deliver consistent returns.

Consider the graph below, which shows the performance of six investment markets over the past ten years. We have ranked the markets form the best performing (at the top) to the worst performing (at the bottom). As you can see, new winners emerge nearly every year.

Exposure to all sectors

Having a portfolio that invests in your home market may also mean you miss out on investment opportunities in some of the world's most important sectors. The graph below shows that different countries tend to favour certain sectors and have less exposure to others.

Few emerging countries offer effective diversification across the entire range
of sectors, so if you limit yourself to one country, you are likely to miss
out on the opportunities offered by industries which are under-represented in that market.

This is particularly important point for Saudi Investors to consider. As the
graph below shows, the Saudi stock market is still developing and focused on a limited number of sectors compared to other world market.