Our experts look at “home bias” and international investing

While it’s human nature to gravitate to what you know, saying “hands-off” to international investing may actually bring more risk to your portfolio than you’d think. Our experts explain why.

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Akweli Parker: Okay. Great. Well, our poll results are in so let’s take a moment to see how you responded to our first poll question. Once again, the question was, “What percentage of your portfolio is comprised of international investments” looks like about half of you said that 10%-30% is the range that you’re in. 30%, so about a third said less than 10%. So, any thoughts or any surprises with those numbers?

Kim Stockton: Yes. No surprises. They actually reflect a very common and understandable home bias. Home bias is just the tendency of domestic investors to overweight their local markets, their own markets. It’s very understandable. It makes sense to invest in what you know, and that’s one of the reasons we’re talking to folks today to demystify the international markets and help investors understand that the right kind of international exposure can actually lower your portfolio risk.

Bryan Lewis: And the U.S. isn’t alone. A lot of developed countries have this home bias, but when you get into the fear, when I talk to clients of getting into international markets, it’s the fear of the unknown as I say, just the political uncertainty, the concern around economic outlooks, the monetary policy. So what investors inadvertently do is find themselves taking more risks just because they are not allocated across the globe as much as we would want.

Important information

All investing is subject to risk, including the loss of the money you invest.

Diversification does not ensure a profit or protect against a loss.