Camille Van Vyve
05 Oct 2023
The Bel 20 is good but the global market is better
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?
A quick look at the Bel 20
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.
Why is the Bel 20 Index important?
The Bel 20 is a reference for both investors and the broader economy for several reasons:
- Indicator of the Belgian stock market: The Bel 20 reflects the health of the Belgian stock market, and by extension its economy. When the index rises, it may signal economic growth, while a decline could indicate economic challenges.
- Decision-making tool: Investors can use the Bel 20 as a reference point when selecting individual stocks to invest in. It helps them identify well-performing sectors and companies in Belgium.
- Investment Opportunity: By investing in index funds or Exchange Traded Funds (ETFs) tracking the Bel 20, investors can diversify their portfolios and gain exposure to a wide range of Belgian companies.
Key companies in the Bel 20
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:
- AB InBev: The world's largest beer brewer
- KBC Group: A major bank and insurance company
- Solvay: A global chemical company
- Proximus: A leading telecommunications provider in Belgium
How to invest in the Bel 20
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.
Why diversification is crucial
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.
Global stock markets and the MSCI World Index
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.
Inclusion of Bel 20 companies in the MSCI World Index
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.
On the long term, the world stock market is much more profitable than the Bel 20
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 less than 1% in less than a year. Although this value was subsequently replaced within the index, the shareholder never recovered his loss.
Easyvest, your partner for global investing
Several studies indicate that no one consistently outperforms the global market over the long term, not even seasoned investors like Warren Buffet. Recognizing this, Easyvest offers its clients a straightforward, transparent, and profitable investment strategy based on global equity and eurozone bond ETFs. This so-called "index" or "passive" strategy enables extensive portfolio diversification and the potential for long-term market returns. With Easyvest, you construct a portfolio that includes Bel 20 values in proportion to their weight in the global market. Eager to discover your potential return? Don't hesitate to run a simulation on our website or reach out to one of our Wealth Managers to learn more!