United States
An Investor’s Guide to Home Country Bias
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. It’s the same with our investments.
As shown in the first chart, the United States makes up 54% of the total world market capitalization. However, the average US investor allocates about three-quarters of their portfolio to US equities, demonstrating a clear preference for domestic investments.
POTENTIAL FOR GREATER ALLOCATION TO FOREIGN INVESTMENT BY US INVESTORS1
As of December 31, 2018
Investors may be out of Step
The problem with investing so heavily in the US is that, even with recent stronger performance, the US ranked 29th out of the 45 markets in the MSCI All Country World Index over the 20-year period ended December 31, 2018. While average US retail investors prefer domestic investment opportunities, they may be missing out on opportunities offered by foreign investments.
STOCK MARKET PERFORMANCE BY COUNTRY2
Total return for the 20-year-period ended December 31, 2018
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.
Other Investor Behavior Videos
Access more short videos to see how behavioral biases show up in our everyday lives.
Watch NowImportant Legal Information
All investments involve risk, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions.
The charts above are for illustrative purposes only; this material is general in nature and intended for educational purposes only; it should not be considered investment advice or an investment recommendation.
For more information on any of our funds, contact your financial advisor or download a free prospectus. Investors should carefully consider a fund's investment goals, risks, sales charges and expenses before investing. The prospectus contains this and other information. Please read the prospectus carefully before investing or sending money.
- Sources: World Market Capitalization: MSCI Perspectives; US Retail Investors: ICI. Based on total net assets of equity mutual funds invested in world equity funds.
- Source: Morningstar, MSCI. Based on the MSCI All Country World Index. The performance of countries and unmanaged indexes does not reflect expenses and may not correspond to the performance of a mutual fund, which may be actively managed and incur expenses. The All Country MSCI World Index is a free float-adjusted, market capitalization weighted index that is designed to measure the equity market performance of global developed and emerging markets. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. Indexes are unmanaged and one cannot invest directly in an index.
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