Investors looking to replace index ETFs or more expensive stock mutual funds or closed-end funds with direct positions in blue chip stocks may want to start by owning some of the largest companies in the world by market cap. Market cap is simply the total value of shares outstanding, and most index funds and ETFs weight towards market cap, meaning they will invest 10x as much in one company as in another company 1/10th the size. The S&P 500 is one of the best known market cap weighted indices, and has largely replaced the Dow Jones Industrial Average as a benchmark for how US stocks are doing.
Beyond the US, Dow Jones (now S&P Dow Jones) has an index called the Dow Jones Global Titans, meant to represent 50 of the largest, best known and most influential int he world, though it is worth noting this index may already be an outdated indicator of global giants, as 34 of the 50 companies are American and none are mainland Chinese.
Below is a list of some the 50 largest companies in the world by market cap as of late November 2017, based on a rough read through the Wall Street Journal. Note there are many Chinese companies, but perhaps more importantly, the large number of banks.
Replacing funds with direct stock positions gives more control over which factors to include in a portfolio: for example, how much exposure to banks, companies not making profits, companies trading at high earnings multiples, etc. In an earlier post, I discussed the historic returns of different factors within the S&P 500.