When Australians travel we like to explore the unfamiliar. We’re quick to purchase the latest gadgets and we crave international brands. In the corporate world, many professionals consider themselves global citizens, travelling abroad for work and play.
So why is it that when it comes to investing, we’re biased, preferring home territory over the opportunities the rest of the world offers?
In direct conflict with the widely accepted benefits of diversification, home bias is the tendency for investors to invest a large proportion of their portfolio in domestic equities.
Research1 has found that there are typically five reasons why Australian investors suffer from a home bias, including; a preference for the familiar; currency risk; global geopolitical risk; tax complexity; and the perceived difficulty and costs of accessing the global market.
This is understandable, especially when one considers the benefit of Australian franking credits and the fact that the ASX tends to be one of the highest yielding stock markets in the world.
How much do Australians love investing at home? This much: