Investing in One Country Could Sink Your Portfolio – Part 1
Why Global Diversification Matters
Diversifying investments across countries is a well-known strategy, but many investors still don’t take full advantage of it. Even as global financial markets grow more connected, people around the world—whether in large economies like the U.S. or smaller, open ones like Canada—tend to favor local assets. This preference, called home bias, comes from a mix of comfort with the familiar and practical reasons. While there are valid explanations for focusing on domestic markets, the costs of missing out on global opportunities—lower risk and better returns—are often too high to ignore. Let’s explore why home bias persists and how spreading your investments worldwide can strengthen your portfolio.
I. The Home Bias Challenge and How It’s Changing
A. What’s Behind Home Bias?
Home bias happens when investors put far more money into their own country’s assets than a balanced, global portfolio would suggest. Why does this happen? People naturally gravitate toward what feels familiar—local companies they read about or hear discussed in the news. Investing abroad can also seem daunting due to currency fluctuations, higher fees, or tax rules, like those affecting foreign dividends or benefits for staying local. Plus, regulations and limited information about overseas markets can make international investing feel out of reach.
Source : Royal Bank of Canada
Access the Full Analysis and Currency-Specific Strategies
The full deep-dive into how to break free from home bias—including detailed strategies for investors in North America, Europe, and Asia—is now hosted on our dedicated platform.
You have the theory, but to put this insight to work, you need the specifics:
Currency Case Studies: Detailed examples showing how USD, EUR, and JPY/CNY investors can use global diversification to protect against local macroeconomic risk.
Tail Risk Protection: How holding a global ETF can limit losses to under 10% during a country-specific crash (like the Greek debt crisis), compared to a potential 50% plunge for domestic investors.
Opportunity Cost: The hard data on why limiting investments means missing out on high-growth regions like India.
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