Is your portfolio suffering from home country bias?
12 September 2018 | Education
Share this on
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.
Monex Securities Australian Pty. Ltd. Is registered in Australia (ABN 84 142 210 179 |AFSL No. 363972). The ultimate holding company is a Japanese public company, Monex Group, Inc. (TYO: 8698)
This website is owned and operated by Monex Securities Australian Pty. Ltd. (“Monex AU”) and it is compiled and presented in accordance with Australian laws and regulations. Monex AU solicits business in Australia, the products and services described herein may not be available in all countries and jurisdictions.
The information, content and material on this website is for information purposes only. It is believed to be reliable at the time of publication, however Monex AU does not warrant its completeness, timeliness or accuracy. The information and materials contained in this website are subject to change without notice.
The information contained in this website is for general information only. As general information, no consideration or evaluation is given of the investment objectives or financial situation of any particular person. Trading and investing involves substantial financial risk. All customers of Monex AU should make their own evaluation of the merits and suitability of any financial products and/or advice or seek specific personal advice as to the appropriateness of engaging in any activity referred to in this website in light of their own particular financial circumstances and objectives. Please ensure that you read the Financial Services Guide (FSG), Terms and Conditions and other relevant documents on this website before deciding to acquire any of the financial products and services we provided.