If you're interested in investing and financial markets, you've probably heard of Belgium's benchmark stock index, the Bel 20. But what exactly is the Bel 20 index? What significance does it hold for investors? Do Belgians tend to overestimate its importance?
The Bel 20 index represents the performance of the 20 largest and most traded companies on the Euronext Brussels stock exchange, formerly known as the Brussels Stock Exchange. It is Belgium's primary stock market index, comparable to well-known indices like the CAC 40 in France, the Dow Jones Industrial Average in the United States and the FTSE 100 in the United Kingdom.
The Bel 20 is a reference for both investors and the broader economy for several reasons:
The composition of the Bel 20 can change over time due to fluctuations in the market capitalization of the included companies. Some well-known companies that typically form part of the Bel 20 include:
Belgian investors can access the Bel 20 by purchasing individual stocks of index components, index funds, or ETFs tracking the Bel 20. These investment instruments can be procured through online brokerage platforms or financial institutions.
While the Bel 20 serves as a valuable gauge of the Belgian market, excessive concentration in a single index can carry risks. Diversification is essential to mitigate risks, and Belgians should avoid over-investing in their home market. Investors should consider allocating their funds to other asset classes, sectors, and regions to safeguard their portfolios against market fluctuations.
There are indices that track global stock markets, such as the MSCI World Index, the FTSE All-World Index, and the S&P Global 1200 Index. These indices encompass stocks from companies worldwide, offering investors the opportunity for global diversification.
Yes, the MSCI World Index includes stocks from companies in various countries, including Belgium. This allows investors to indirectly gain exposure to Bel 20 companies when investing in funds that track this index. However, the exact weight of Belgian stocks in the MSCI World Index can fluctuate based on market conditions and the performance of Belgian companies.
From 1999 to 2023, the performances of the Bel 20 have been almost systematically lower than those of the world stock market, particularly since 2010 when the gap has widened considerably. Over the entire period, the world stock market returned almost three times more than the Belgian index! With only 20 stocks, a portfolio modeled on the Bel 20 is indeed very concentrated and therefore quite risky. Remember the 2008 crisis: with the bankruptcy of Fortis bank, which was then part of the Bel 20 and considered a super safe investment, around 15% of the value of the index was reduced to zero. Although this value was subsequently replaced within the index, the shareholder never recovered his loss.
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