Going Global

Many investors, both in the US and abroad, make a common mistake: they typically are too home-country focused. So US investors tend to be heavily biased toward US stocks, and may give too much credence to a domestic index like the Dow (a flawed index, but that’s for another blog post).  Likewise for UK investors and the FTSE, Germans and the DAX, and so on.

Why is this, and why is it possibly detrimental? As Aaron Anderson points out in his book, Own the World, people tend to prefer what’s familiar. And what’s more familiar than home? For example, most Americans know Wal-Mart, its business, and its target market—but most have never heard of Aldi Markt (one of the biggest discount supermarket chains in Germany). It’s this unfamiliarity that makes many investors uncomfortable with foreign investing.

But as the world’s economies continue becoming more interconnected, investors would likely do well to globalize their portfolios—and for ideas on how to create one, see Own the World by Aaron Anderson.