An Investor’s Guide to Home Country Bias

Next Steps

Download Six Barriers to Investment Success: Uncovering Your Behavioral Biases

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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. 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.

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