Diversification Means Investing Overseas Too

Investors are prone to sticking to equities in their own country but many of the historical arguments for home bias no longer hold water, argues Morningstar director of global ETF research Ben Johnson

13 June, 2019 | 9:13AM

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 If diversification is the only free lunch in investing, investors around the world might be leaving a lot on the lunch table. Diversification is measured across a number of dimensions: individual stocks, industries, sectors, and so on. Most investors' portfolios are fairly well spread along these lines. However, when it comes to investing overseas, many decide to ditch diversification at the border.

"Home bias" is the term used to describe investors' tendency to tilt their portfolios in favour of stocks listed on their domestic stock market (bonds, too, but I'm going to focus on stocks).

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