The short version
- One world index fund already holds about 2,400 large and mid-sized companies in 47 countries.
- From 1950 to 2020, an all-country mix's worst ten years lost 2.2% a year after inflation, against 7.9% for a typical single country.
- Diversification didn't help much in the very worst single year. Crashes tend to hit everywhere at once.
- More funds isn't the same as more diversification. Funds that hold the same companies add cost and complexity, not safety.
Part of Research. The central finding is in active vs passive funds: what the evidence shows.
- 2,414companies in 47 countries in one world index (MSCI ACWI, September 2026)
- −2.2% vs −7.9%worst ten years a year: an all-country mix vs a typical single country (1950–2020)
What diversification does
Some risks belong to one company: a failed product, a scandal, a bad boss. Others belong to one country: a recession, an election, a currency crisis. Owning many companies in many countries means no single one of those can sink you.
What diversification can’t remove is the risk of the whole market falling. When the world’s stock markets drop together, a diversified fund drops too.
Even a famous company can be a small slice of a fund: see how much Tesla an S&P 500 ETF holds.
What the data shows
Using long-run data for 16 countries from 1950 to 2020, I compared holding a single country’s stock market with an equal mix of all 16, rebalanced each year.
Spreading across countries made the worst decade far less bad
Worst ten-year stretch, as a yearly return after inflation, 1950–2020
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
| Market | Worst ten years, a year | Ups and downs (standard deviation) | Share of ten-year periods that lost buying power |
|---|---|---|---|
| Portugal | −32.6% | 31.9% | 38.7% |
| Spain | −16.6% | 23.6% | 21.0% |
| Italy | −14.0% | 25.0% | 43.5% |
| France | −9.6% | 25.3% | 38.7% |
| Japan | −6.5% | 21.9% | 19.4% |
| Finland | −6.3% | 32.7% | 8.1% |
| Norway | −6.0% | 24.8% | 25.8% |
| Netherlands | −5.6% | 21.1% | 17.7% |
| UK | −5.4% | 22.1% | 11.3% |
| Belgium | −5.1% | 20.6% | 21.0% |
| Australia | −4.6% | 19.6% | 9.7% |
| Switzerland | −4.0% | 20.7% | 14.5% |
| USA | −4.0% | 16.2% | 16.1% |
| Germany | −2.5% | 26.6% | 14.5% |
| Sweden | −1.7% | 23.1% | 4.8% |
| Denmark | −1.3% | 20.8% | 3.2% |
| All-country mix | −2.2% | 16.3% | 11.3% |
| After inflation, 1950–2020 | Typical single country | All-country mix |
|---|---|---|
| Year-to-year ups and downs (standard deviation) | 23.5% | 16.3% |
| Share of years that lost money | 34.9% | 25.4% |
| Worst ten years, a year | −7.9% | −2.2% |
| Share of ten-year periods that lost buying power | 19.2% | 11.3% |
| Worst single year | −47.1% | −44.6% |
“Typical single country” is the average of the 16 countries’ own figures. Spreading across countries made the ride smoother and the bad decades much less bad. It barely helped in the single worst year, because big crashes tend to hit everywhere at once.
Diversification won't stop a crash. It stops one country's bad decade becoming yours.
Overlap: when more funds add nothing
A global index fund already holds thousands of companies across dozens of countries. Adding more funds only diversifies further if they hold something different.
- Global plus S&P 500. The US is already about 64% of a world index. Adding a US fund on top increases your bet on the US. It doesn’t spread it.
- Several global funds from different providers. They hold almost the same companies. You get more paperwork, not more diversification.
- Global plus FTSE 100. A deliberate tilt towards the UK. That can be a choice, but it is a tilt. Home bias explains the trade-off.
To check overlap, compare the top holdings and country weights on each fund’s factsheet. How to read an ETF factsheet shows where to find them.
When a second fund can help
Funds that hold genuinely different things can change how a portfolio behaves. The most common example is adding bonds, which have usually moved differently from shares. Bond ETFs for beginners explains how they work. Whether that suits you depends on your timeframe and how much ups and downs you can live with.
Questions to ask yourself
- What does each fund hold that the others don’t? If the answer is “not much”, it may be adding cost, not safety.
- Can I explain why each fund is there? A short list you understand beats a long one you don’t.
- What would I do in a crash? Diversification helps most if you can stay invested through the bad years.
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
- 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.