Like many publicly traded companies in the US

A global look at the number of listed companies

How many stocks are in the Wilshire 5000 Total Market Index, a commonly used benchmark index for the US stock market?

The logical answer to this question would be 5,000 companies, but in reality the index only comprised around 3,600 individual stocks as of December 31, 2016.

As the largest stock market in the world, around half of the value of all stocks is in the US - should investors be concerned about a decline in companies listed there?

There's no need to worry, about 50-55% of the total global stock market is in the US. For comparison: in 1995 it was around 40%.

The US versus the rest of the world

From a global perspective, however, the number of listed companies has not decreased. In fact, the number of companies publicly traded in the United States, other developed and emerging markets grew from around 23,000 in 1995 to 33,000 at the end of 2016. - It's important to highlight that this number is far larger than many investors' investable stock universe.

It is true that there are fewer publicly traded companies in the US today than there were in the mid-1990s (a decrease of around 2,500 companies). It is also clear, however, that the rise in prices in both the rest of the developed and emerging markets more than offset the decline in prices in the US.

It is still a matter of debate as to why US quotes have fallen back during this period, but there is already a body of scientific research into the possible causes of this change.

On the one hand, it examined whether changes in the regulatory environment for listed companies in the US compared to other countries could be responsible for the decline in listed companies in the US.

On the other hand, there are studies that dealt with the question of whether, since the 2000s, private companies have tended to sell themselves to larger companies rather than going public themselves.

In any case, these numbers alone allow investors to draw only one conclusion - the number of publicly traded companies around the world has increased, not decreased.

A global investment approach

For investors looking to diversify their portfolios broadly, the importance of this trend in global listings is clear. The global stock market is large and there is plenty of investment opportunity.

Even if global diversification means that an investor's portfolio will generally not have the best performance against individual domestic stock markets, it will not have the worst performance either.

Broad diversification offers the possibility of achieving a more stable investment result and can also help to reduce the risks associated with an excessive concentration on a particular country.

With a truly global approach to investing, investors have the ability to capture returns wherever the opportunity presents themselves.

Conclusion

To build a broadly diversified portfolio, investors need to look beyond a single country's stock market and have a global approach to investing.

For further information I am gladly at your disposal.

Sabine Fiedler

Owner sf financial planning