By The Advocates
Home Country Bias is defined as an investors’ natural tendency to be most attracted to investments in domestic markets. It’s one of the most common biases for American investors (especially as we watch the S&P500 continue to soar) and the latest JP Morgan “guide to the markets” confirms this fact. Tucked into the last few pages of the Q1 2017 Guide to the Markets, Dr. David Kelly’s team included an interesting chart. On the left side of the page the chart confirms that U.S. investors love their home cooking to the tune of 74% of an investor’s portfolio is in U.S. stocks. This despite the fact that the U.S. stock market is arguably one of the most expensive in the world!
What about regional considerations? Quoting the guide commentary, “The right side of the page shows that investors may invest with bias regionally as well. For example, the chart shows that investors in the northeast are more likely to own financials stocks. These investors may be biased toward the sector because of the investors’ proximity to New York City, a global financial hub. In the same vein, investors in the west are more likely to own technology stocks because they feel familiar with Silicon Valley-based firms. Industrials and energy are the key economies of the Midwest and the southeast, respectively, and investors in each region tend to overweight those sectors.”
It’s common to be more comfortable investing in what you understand (U.S. stocks and energy for most of us) however, we must be careful not to let our comfort with “the familiar” lead us to lose our sense of balance in our portfolios. If you have a personal trading account, don’t forget the adage “too much salt spoils the soup!” Have a terrific week!