Are We Biased?

fig5Vanguard mutual fund recently released a report entitled The Global Case for Strategic Asset Allocation and an Examination of Home Bias.  Home bias is the tendency of a nation’s investors to invest the majority of their assets in their own nation’s equities regardless of how much or how little their nation represents as a percentage of total global assets.

In the report, summarized in the chart above, Vanguard notes that U.S. stocks make up 50.9% of global market capitalization, but U.S. investors have an average of 79.1% of their equity holdings in American stocks – an apparent “overweighting” of American equities relative to the rest of the world.  But Americans are nowhere near the most imbalanced.  Canadians, for example, are significantly more imbalanced, having over 59% of their assets invested in Canada while Canada comprises only 3.4% of global market cap, and Australians are the most imbalanced, having over 66.5% of their assets invested in Australia, which is only 2.4% of global market cap!

We are always looking for the best opportunities globally for all of our clients’ portfolios when reviewing weekly, monthly, and quarterly depending on each unique strategy. Yes, we are biased towards the opportunities that provide the greatest potential!

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