24 Aug 2016
It’s often said that people invest with blinders on. This is so true when we look at where people invest their money. This is referred too as “Home Country Bias.” Investor’s natural tendency to invest in domestic stocks and companies. For example US stocks account for 50.9% of global market capitalization, but US investors on average have 79.1% of their equity holdings in American stocks ( Vanguard 12/31/14). It gets worse for other parts of the world:
– Canada represents 3.4% of Global Market Cap yet investors holdings in domestic equities equals 59%
– Australia represents 2.4% of Global Market yet investors holdings in domestic equities equals 66.5%
The important part of this study is that these bias’s are not just a United States problem. So, as you are redesigning your portfolio allocations keep in mind your tendency to invest with your heart and not your head.
Good Luck! Jeff