When it comes to investing, we’re all pretty biased.
That bias comes down to our propensity to root for the home team. Dubbed home-country bias, the majority of us overweight our own domestic stock markets. The idea is that we tend to believe that our nation’s equities markets are safer and will provide higher returns. This has been supported by the idea that America has been the growth engine of the world for a long time and represents the largest share of the world’s economy.
But that bias could be hurting us over the long term.
There’s nothing wrong with American stocks. But they only represent a diminishing opportunity set when it comes to investing. The truth is, many of the world’s leaders, across a variety of sectors, are now located overseas. For investors, eliminating home-town bias could be critical for long-term returns.