Portfolio Dilemma: is there any point owning both global and US trackers?

Ron asks: I have had mixed results with active funds – and my own stock picking – in the past, and have increasingly used low-cost index funds as a way to buy into stock markets. But I worry about whether I’m doubling up in what I hold.

One of my main holdings is an MSCI World tracker fund but I also have a lot of money invested in an S&P 500 exchange-traded fund (ETF). Both have performed well but I have noticed claims that they basically hold the same shares – especially if the US market is in a bubble.

Are they really as similar as people claim? And what should I do?

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With the S&P 500 dominating returns for the much of the last decade and the seemingly “global” reach of the MSCI World index coming with its own appeal, it has become extremely common for investors to hold funds that track both in the same portfolio.

But as you highlight, this can mean doubling down on some of the holdings, and in particular some of those currently at the centre of bubble concerns. 

The US has represented an especially high proportion of “global” indices in recent years, and at the end of May it accounted for around 72% of the iShares Core MSCI World ETF USD Acc GBP (LSE:SWDA). The second best-represented country in that fund, Japan, made up less than 6% of the portfolio.

If we look at individual shares, artificial intelligence (AI) mainstay NVIDIA Corp (NASDAQ:NVDA) made up 5.4% of the MSCI World fund, not far behind its 7.9% allocation in the Vanguard S&P 500 ETF. As our table shows, the Magnificent Seven shares are well represented in both.

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“All-World” funds, whether they track an MSCI index or one offered by FTSE tracker funds , dilute the US exposure slightly by putting a small proportion of the portfolio into certain emerging markets. The MSCI index only invests in companies listed in developed countries – 23 in total. 

But they have a similar problem: the Vanguard FTSE All-World ETF USD Acc GBP (LSE:VWRP), a popular name with our customers, had a roughly 62% allocation to North America at the end of May, with the Magnificent Seven shares showing up in force too.

Without the emerging market exposure, the weighting to the United States is higher for iShares Core MSCI World ETF, at just over 72%.

Performance

The three funds mentioned above have fairly similar performance, although the “all-world” option does deviate at times thanks to its emerging market exposure. But the point is that both seemingly global funds have shown strong correlation to the US equity market in recent years.

Source: FE Analytics. 2026 figure as at 02/07/26. Past performance is not a guide to future performance.

That hasn’t been a bad thing for much of the last decade, with any global trackers you hold likely to soar ahead alongside the S&P 500. 

But it robs you of proper diversification and leaves you overly exposed to any problems in the US market. We saw that in 2025, when the S&P 500 struggled relative to many other markets and the MSCI World, equally, lagged.

What’s the answer?

Betting against the US has tended to end badly, but it does make sense to diversify beyond it. Investors might therefore be wary of holding a global and US tracker together – and to ask whether their portfolio is really global.

Global reach can be achieved, even using nothing but tracker funds. There’s the popular Vanguard LifeStrategy range, which still has a decent allocation to the US but also puts a good chunk of money elsewhere. North America accounts for about half of the Vanguard LifeStrategy 100% Equity A Acc (B41XG30) fund, with the UK representing roughly a fifth, Asia and the emerging markets on about 11%, and Europe on 9%.

Investors can also simply combine tracker funds covering the main equity markets. We recently created a dummy portfolio with 20% apiece in a US, UK, Europe, emerging market and Japan tracker fund, and found that the portfolio’s recent performance held up well.

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A slightly simpler approach would be to have some of your portfolio in an MSCI World ex-USA fund, such as the iShares MSCI World ex-USA ETF USD Acc GBP (LSE:XUSE), and then hold an S&P 500 tracker alongside it. 

Investors can also find some actively managed global equity funds that diversify beyond the US – although this might not suit a fan of low-cost index funds.

Finally, it’s worth remembering that numerous funds have launched with the aim of giving exposure to the US market with less reliance on the mega-cap tech stocks. 

These include equal weight S&P 500 trackers, which give a roughly equal allocation to every stock in that index, and even a fund that excludes the mega-cap shares.

Such portfolios do reduce the risk of jumping headfirst into an artificial intelligence (AI) market bust. But there’s no guarantee they won’t suffer too, and investors do also risk missing out on another period of strong performance from names like Nvidia. 

If you have a question you’d like to be considered in our Portfolio Dilemma series, we’d love to hear from you. Please contact: editorial@ii.co.uk