Data Shows Investing is Heavily Biased by Geography
For investors, there’s no place like home. Data shows that investors are heavily sector-biased based on where they live.
Openfolio.com, a platform tracking the performance and activity of 40,000 investors, calculated the overall popularity for the top 2,000 stocks and funds owned by its users in the United States. The data was then segmented based on sector and geography.
The results are clear: the West Coast of the United States loads up on tech stocks and the Northeast loves financials more than anyone else. The states along the Gulf of Mexico buy more energy stocks, and states in the Midwest are more likely to own industrials. Interestingly enough, the most balanced sector was healthcare, which all geographic regions seemed to own equally.
The real question is: what kind of returns did investors get? Over the course of 2014, the average investor on the West Coast led the pack with a 5.9% performance. The Midwest averaged 4.7% and the Northeast got 4.5% returns. The Southeast, which has a bias towards energy stocks, was likely hard hit by the oil price crash with the lowest average of 3.1%.
Familiarity with sectors and industries plays a big role, and it makes sense. People exposed to the technology sector in places like Silicon Valley and Seattle are more likely to feel comfortable investing in tech-related equities. While it is a good thing to invest in areas where one feels comfortable, it can also create asset allocation and risk problems. This is why it is important for investors to know their biases and to manage their portfolios accordingly.
Ranked: The World’s 50 Top Countries by GDP, by Sector Breakdown
This graphic shows GDP by country, broken down into three main sectors: services, industry, and agriculture.
Visualized: The Three Pillars of GDP, by Country
Over the last several decades, the service sector has fueled the economic activity of the world’s largest countries. Driving this trend has been changes in consumption, the easing of trade barriers, and rapid advancements in tech.
We can see this in the gross domestic product (GDP) breakdown of each country, which gets divided into three broad sectors: services, industry, and agriculture.
The above graphic from Pranav Gavali shows GDP by country, and how each sector contributes to an economy’s output, with data from the World Bank.
Drivers of GDP, by Country
As the most important and fastest growing component of GDP, services make up almost 60% of GDP in the world’s 50 largest countries. Following this is the industrial sector which includes the production of raw goods.
Below, we show how each sector contributes to GDP by country as of 2021:
|🇰🇷 South Korea||57.0||32.4||1.8||8.8||$1.8|
|🇸🇦 Saudi Arabia||46.5||44.7||2.7||6.1||$0.8|
|🇭🇰 Hong Kong||89.7||6.0||0.1||4.3||$0.4|
|🇿🇦 South Africa||63.0||24.5||2.5||10.0||$0.4|
Industrial sector includes construction. Agriculture sector includes forestry and fishing. *Data as of 2019.
In the U.S., services make up nearly 78% of GDP. Apart from Hong Kong, it comprises the highest share of GDP across the world’s largest economies. Roughly 80% of American jobs in the private sector are in services, spanning from healthcare and entertainment to finance and logistics.
Like America, a growing share of China’s GDP is from services, contributing to almost 54% of total economic output, up from 44% in 2010. This can be attributed to rising incomes and higher productivity in the sector as the economy has grown and matured, among other factors.
In a departure from the top 10 biggest countries globally, agriculture continues to drive a large portion of India’s GDP. India is the world’s second largest producer of wheat and rice, with agriculture accounting for 44% of the country’s employment.
While the services sector has grown in India, it makes up a greater share in other emerging economies such as Brazil (58%), Mexico (59%), and the Philippines (61%).
Services-led growth has risen faster than manufacturing across many developing nations, underpinned by productivity growth.
This structural shift is seen across economies. In many countries in Africa, for instance, jobs have increasingly moved from agriculture to services and trade, where it now accounts for 42% of jobs.
These growth patterns are supported by rising incomes in developing economies, while innovation in tech is lowering barriers to enabling service growth. As the industrial sector makes up a lower share of trade and economic activity, the service sector is projected to make up 77% of global GDP by 2035.
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