Is your portfolio suffering from home country bias?

11 September 2018  |  EDUCATION

Depending on how far you are in your investment journey, you may have heard about local bias and investment diversity. Diverse portfolios spread your risk – which is another way of just saying ‘don’t put all your eggs in one basket.’ By broadening the scope of your investments, losses in one area can be bolstered by gains in another investment pocket.

The standard form of portfolio diversity seems obvious. Everyone will tell you to buy stocks in multiple unrelated sectors. , you might purchase bank stocks, pharmaceutical shares, construction holdings, beauty products, and something from the education sector. Market research will inform the specific companies you target. However, there’s a mistake many investors make – even seasoned ones. They keep things local.

Eyes on the prize

It’s a rational approach. You want to buy shares you’re familiar with, and maybe you want to know their offices are within reach. It is how many investors end up with the bulk of their portfolio based in their country of origin. This isn’t a bad thing in itself but say – for example – there’s an earthquake, a bushfire, or a death at the political level. This would impact all the country’s shares and currencies, and neighbouring countries too.

That’s why you should learn  offshore trading and invest some of your earnings overseas. It’s not a hard thing to do. All you need is a good internet connection. You can sign up with us, and we’ll give you access to 12 markets around the world, including Asia and the US. Moreover, you can still trade your Aussie shares so that you can monitor and manage all your holdings – local and global – through a single account.

In the same way that you invest in polar shares (fashion and farming, for example), it can be helpful to invest in countries that are opposites, both geographically and culturally. For example, investing in both  China and the US helps you cash in on both sides of the trade war. Add Hong Kong and Taiwan to benefit from their divergent economic and political relationships with mainland China.

Location does matter

Geographical and social diversity doesn’t just cushion you from natural disasters, it can also position you to take advantage of shake-ups because you have bets on both teams. Simply open an account and you’re set. If you’re still uneasy about investing in lands you can’t physically see; there’s a second approach.

Instead of buying from offshore brands, buy a global brand with a physical presence in Australia. You could buy Coca-Cola, Google, Alibaba, Mitsubishi, or any other international business that has offices here. It’s not as effective as buying overseas, but it does give you a taste of global trade, and you can use it to piggy-back into a full-on overseas trade.

To learn more about the portfolio diversification, offshore companies worth investing in, or to  open your own trading account, fill out our contact form and we’ll get right back to you.

Read Also:

Top three things to consider when investing in international markets

Things you need to know prior to investing offshore

What is diversification and how does it work

The Benefits of not just buying Australian share

What is the "Home Country Bias" and why this is slowing many Australian investors down

Risk Disclaimer: The information above is of general nature only and does not take into account your objectives, financial situation or investment needs. Prior to you make an investment decision, please make sure you carefully read and fully understand our Financial Services Guide, Terms and Conditions, Privacy Policy and other relevant documents that you can obtain from this website. Monex Securities Australia Pty Ltd (AFSL No. 363972; ABN 84 142 210 179) is the Financial services provider. Financial products trading carries risks and may not be suitable for all investors. You are strongly recommended to seek independent financial advice before making any investment decisions.


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