The short version
- The UK is about 3% of the world's stock markets by value.
- Investors everywhere keep far more at home than that. Around 1990, British investors held 82% of their shares in the UK.
- From 1950 to 2020, UK shares ranked 8th of 16 countries after inflation, and a different country came top in every decade.
- Holding only one country ties your fortunes to it. A global fund spreads the risk, though today it's mostly invested in the US.
Part of Research. The central finding is in active vs passive funds: what the evidence shows.
- 3%the UK's share of the world's stock markets (MSCI ACWI, 30 September 2026)
- 82%of British investors' shares were held at home around 1990 (French and Poterba)
- 8th of 16the UK's rank for returns after inflation among 16 countries, 1950–2020
How big is the UK?
The UK’s stock market is famous, but it’s a small part of the world’s. In the MSCI ACWI Index factsheet, which covers 2,414 large and mid-sized companies across 47 countries, the UK made up 3% of the total at the end of September 2026. The US was 64.21%, Japan 5.2% and Taiwan 3.46%.
So a fund that holds the world’s markets in proportion to their size puts about 3p in every pound into UK companies.
What home bias is
Investors everywhere tend to keep far more money in their own country’s shares than its size would suggest. Economists call this home bias.
It isn’t new. When French and Poterba (1991) studied it around 1990, British investors kept 82% of their shares in the UK, Americans 94% in the US, and Japanese investors more than 98% in Japan. The authors concluded this was largely investors’ own choice, not rules forcing them to.
The reasons are understandable: familiar company names, spending in pounds, and a sense that home is safer. But familiarity isn’t the same as lower risk.
What 70 years of data shows
Using long-run data for 16 countries with complete records from 1950 to 2020, I compared each country’s stock market after its own inflation.
Over 71 years the UK was mid-table: 8th of 16
Average yearly return after inflation, 1950–2020. Dashed line: the equal-weighted mix of all 16.
Source: Jordà-Schularick-Taylor Macrohistory Database (R6), 16 countries with complete data, 1950–2020. Total returns with dividends reinvested, after each country's own inflation, in local currency, before fees and tax. The all-country mix is an equal-weighted average rebalanced yearly. Analysis: Invest in ETFs. Chart licensed CC BY-NC-SA 4.0.
Show the data
| Country | Yearly return after inflation |
|---|---|
| Sweden | 8.9% |
| Finland | 8.5% |
| Germany | 8.4% |
| Denmark | 7.9% |
| USA | 7.6% |
| Netherlands | 7.2% |
| Japan | 6.8% |
| UK | 6.5% |
| Switzerland | 6.3% |
| Australia | 5.6% |
| Belgium | 5.3% |
| Spain | 4.7% |
| Norway | 4.5% |
| France | 3.4% |
| Italy | 3.0% |
| Portugal | −0.5% |
| All-country mix | 7.2% |
The UK did fine: 6.5% a year after inflation, about mid-table. But it wasn’t special, and an equal mix of all 16 countries did a little better, at 7.2%.
The bigger lesson is that leadership kept changing. The top market was Germany in the 1950s, Spain in the 1960s, Japan in the 1970s, Sweden in the 1980s, Finland in the 1990s, Australia in the 2000s, Denmark in the 2010s. Nobody could have picked those in advance.
A different country came top in every decade. The UK was never first or last.
Yearly return after inflation for each of 16 countries' stock markets, by decade
- UK
- Other countries
- All-country mix
Source: Jordà-Schularick-Taylor Macrohistory Database (R6), 16 countries with complete data, 1950–2020. Total returns with dividends reinvested, after each country's own inflation, in local currency, before fees and tax. The all-country mix is an equal-weighted average rebalanced yearly. Analysis: Invest in ETFs. Chart licensed CC BY-NC-SA 4.0.
Show the data
| Decade | Best country | Worst country | UK (rank) | All-country mix |
|---|---|---|---|---|
| 1950s | Germany (33.0%) | Norway (2.3%) | 12.4% (6 of 16) | 13.8% |
| 1960s | Spain (9.6%) | France (−6.7%) | 4.8% (7 of 16) | 4.4% |
| 1970s | Japan (4.9%) | Portugal (−21.4%) | −1.3% (6 of 16) | −2.0% |
| 1980s | Sweden (22.8%) | Switzerland (7.1%) | 16.2% (5 of 16) | 16.1% |
| 1990s | Finland (25.5%) | Japan (−6.3%) | 10.9% (9 of 16) | 12.3% |
| 2000s | Australia (5.5%) | Finland (−6.3%) | −0.4% (8 of 16) | −0.1% |
| 2010s | Denmark (13.4%) | Portugal (−2.5%) | 5.6% (12 of 16) | 7.2% |
The UK ranked between 5th and 12th out of 16 in every decade. Some countries had far worse stretches: Japan’s shares lost 6.3% a year after inflation through the 1990s.
The other side: a global fund is mostly American
Avoiding home bias has its own catch. With the US at about 64% of the world index, a global fund is now heavily tied to one country, and its ten biggest companies made up 25.4% of the MSCI ACWI at the end of September 2026.
That’s not a reason to avoid a global fund, but it’s worth knowing what you own. Global, FTSE 100 or S&P 500? explains how index choice shapes this.
The same concentration shows up company by company. HSBC alone is about a tenth of a FTSE 100 ETF, while Apple, Alphabet and Tesla show how much of a world or S&P 500 fund sits in a handful of US names.
Holding only your home market is a bet on one country. Holding the world is a bet on all of them, weighted by size.
Questions to ask yourself
- How much of my money is in UK shares, and why? If the answer is “because they’re familiar”, that’s home bias.
- Do I already have UK exposure elsewhere? Your job, your home and a workplace pension may all depend on the UK economy.
- Am I comfortable with the US share of a global fund? Check the country weights on the factsheet. How to read an ETF factsheet shows where to look.
About the data
Returns are total returns with dividends reinvested, adjusted for each country’s own inflation and measured in its own currency, before fees and tax. The “mix” is an equal-weighted average of the 16 countries, rebalanced each year. That’s a simplification: it ignores exchange rates and the size of each market. Only countries with a complete record from 1950 are included.
This page summarises published research and historical data. It isn't a forecast or advice about what you should do. Investments can fall as well as rise, and you may get back less than you put in. For free, impartial guidance, try MoneyHelper. Read the full disclaimer.
Sources
- MSCI ACWI Index factsheet, MSCI, data as of 30 September 2026
- Kenneth R. French and James M. Poterba (1991), "Investor Diversification and International Equity Markets", NBER Working Paper 3609
- Macrohistory Database, release 6, Òscar Jordà, Moritz Schularick and Alan M. Taylor. Consulted 13 October 2026. Licensed CC BY-NC-SA 4.0.
- Jordà, Knoll, Kuvshinov, Schularick and Taylor (2019), "The Rate of Return on Everything, 1870–2015", Quarterly Journal of Economics 134(3).
Facts checked 14 October 2026.