During a period in which many of us have literally been stuck at home due to COVID-19, we urge investors to reevaluate the level of home bias in their portfolios and consider the merits of global diversification.
Many investors around the world, particularly those in growth markets, have high exposures to their domestic markets. A degree of home bias may be optimal from an investment perspective ― due to tax considerations or other factors ― and in some cases home biases are driven by constraints beyond investors’ control such as regulations or implementation practicalities. However, many investors could enhance their risk-adjusted returns by reducing home biases. The home bias phenomenon is one of the most prominent elements of inefficiency across growth market investor portfolios.
Home is where the heart is, but investors must leave home for optimal investment outcomes.
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