Is Home Bias Your Biggest Investment Mistake?

long-term savings systems Marc Faber, Gloom Boom & Doom Report October 1987 crash, perma-bears, bearish, stock market crash, economic recession, S&P 500 crash, The Great Money Illusion; The Confusion Of The Confusions , Riding the Millennial Storm: Marc Faber's Path to Profit in the Financial Markets, Tomorrow's Gold: Asia's Age of Discovery, bubbles everywhere hyperinflation

Chances are, you’ve invested way too much money in your home country.

And you’re not alone.

Janet Yellen Just Gave Banks A Secret Hint To Pay Out $100 Billion In Dividends

Studies show that U.S. investors hold around 70% of their equity assets in U.S companies.


jeremy siegel, Wharton School, bullishness, perma bull, dow, stock market rally, bull market, Stocks for the Long Run, buy stocks, Wizard of Wharton, Shiller vs Seigel, The Future for Investors, CNBC, supply-side economics,Lawrence Kudlow, WisdomTree InvestmentsBut the U.S. only makes up around 55% of the world’s stock market value (U.S. stocks’ recent outperformance has massively boosted its global share). So, by that measure, a 70% allocation to U.S. stocks is “overweight,” if you want to be properly diversified.

Get The Timeless Reading eBook in PDF

Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.


U.S. Stocks, Bonds And The Bull Market - Lately, All Ladders

It gets worse…

If you live in the U.S., chances are you own a home there. And your job is there. You also probably have all of your savings and investments parked at a U.S. bank. So your exposure to your home country is much, much greater than you think.

Ask yourself… Could you withstand a turndown in the U.S. economy? Chances are you’d be devastated…

You could lose your job. The value of your home could plummet. Your bank could fail. Your retirement accounts could drop in value by 20% or more.

In other words, a lot can go wrong.

The math gets even worse when you talk about bonds.

Based on global bond market values, you should have about a third of your portfolio in foreign bonds. The typical American’s exposure is closer to zero.

This investor behavior is known as the “home-country bias.” And it’s not just U.S. citizens. Investors all over the world are “overweight” their home country.

Under normal circumstances, it’s never smart to put all your eggs in one basket. It’s far too risky.

But the U.S. stock market is currently trading at all-time highs. And, regardless of which measure of value you choose, U.S. stocks are expensive.

Let’s look at the cyclically adjusted price-to-earnings (CAPE) ratio. This method was developed by famed economist Robert Shiller. And it compares current prices to average earnings over the past 10 years, adjusted for inflation.

It provides a more complete valuation picture than a simple price-to-earnings ratio. And today the S&P 500’s CAPE ratio is around 30.

It’s only been that high at two other times in history — 1929, just before the huge crash, and the tech bubble of 2000.

We’re not saying a market crash is right around the corner.

Of course, it could be… We don’t know. But history shows what comes next usually isn’t pretty.

Meanwhile, stock market volatility is near record lows… investors have never been so care free.

Don’t let the second-longest bull market in history lull you into a false sense of security.

You need to realize there are lots of risks out there today. And you need to get some money outside the U.S.

You need a solid Plan B for when things go wrong.

It’s simply not prudent to sit and do nothing.

And you can get started today by becoming a member to Sovereign Man: Confidential. In our flagship, premium publication, we tell you how to get started with second passports (potentially for free) and how to open a foreign bank account (if you don’t have any money parked outside the U.S., this is a great way to start). We also share lots of low-risk, high-yield investment strategies that are off the beaten path.

Plus, for a short time, we’re offering Sovereign Man: Confidential at a large discount. You can learn more here…


For exclusive info on hedge funds and the latest news from value investing world at only a few dollars a month check out ValueWalk Premium right here.

Multiple people interested? Check out our new corporate plan right here (We are currently offering a major discount)

About the Author

The Sovereign Investor
The Sovereign Investor Daily delivers timely and actionable information to succeed in any market. We realize that a world of investment opportunity exists in stocks, commodities, currencies and asset protection that are often overlooked. Our mission is to bring them to you each day.

Be the first to comment on "Is Home Bias Your Biggest Investment Mistake?"

Leave a comment

Your email address will not be published.