An Investor’s Guide to Home Country Bias

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What is Home Country Bias?

Home country bias refers to the tendency to favor companies and products from our home country or region.

Home Sweet Home

Where we live has a big influence on our everyday lives—from the foods we like, to the sports teams we cheer for, we tend to prefer what’s nearby. A recent study by Openfolio looked at US investor portfolios by geography to measure how much where we live affects our investments.

It was not too surprising that investors showed a clear preference for investing in the types of companies that were more predominant in their respective regions.

HOW LIKELY A US INVESTOR IS TO OWN STOCKS IN A GIVEN INDUSTRY VS. AVERAGE1

Investors may be out of Step

The tendency to invest in our own backyard continues at a national, and even global level. As shown in the second chart, the United States makes up 47% of the total world market capitalization. However, the average US investor allocates three-quarters of their portfolio to US equities, demonstrating a clear preference for domestic investments. In doing so, they may be missing out on opportunities offered by foreign investments.

POTENTIAL FOR GREATER ALLOCATION TO FOREIGN INVESTMENT BY US INVESTORS2

WHAT CAN YOU DO ABOUT IT?

One of the best ways to make better financial decisions is to work with a financial advisor. A financial advisor will take the time to understand your individual needs and create an investment strategy that’s tailored to your specific goals, your individual situation and your risk tolerance.

As you navigate the market, an advisor can also help you keep your emotions and biases in check and stay on track with regular portfolio reviews and adjustments.

Next Steps

Every day we are faced with decisions—some are easier to make than others. Learn more about behavioral biases and the impact they can have on investment portfolios.

Download Six Barriers to Investment Success: Uncovering Your Behavioral Biases

Download​

Other Investor Behavior Videos

Access more short videos to see how behavioral biases show up in our everyday lives.

Watch Now