Home Country Bias

What do we do when we’re at the old ballgame? We root, root, root for the home team. And what do we do when we’re at the old investment broker’s place? Turns out, we still tend to root, root, root for the home team: whether subconsciously or on purpose, we usually prefer to invest in companies from our own country. This is what’s known as “home country bias.”

There’s nothing wrong with supporting domestic commerce. In fact, many would argue that doing so is a good thing. But we should be aware that our home country bias, while it may be all noble and patriotic and stuff, just might be hitting us in the pocketbook if we’re missing out on more lucrative investment opportunities outside of the U.S.

Also, it’s good to keep in mind that portfolio diversity is a good thing, and if we have all our investment eggs in one country’s basket, we might not be protecting ourselves against fluctuations in that country’s markets.