Diversification means investing overseas too

Many arguments for investing with a home bias no longer hold water, argues Morningstar director of global ETF research Ben Johnson

Ben Johnson, CFA 17 June, 2019 | 3:04AM

Mixing highways

If diversification is the only free lunch in investing, investors around the world might be leaving a lot on the lunch table. Diversification is measured across a number of dimensions: individual stocks, industries, sectors, and so on. Most investors' portfolios are fairly well spread along these lines. However, when it comes to investing overseas, many decide to ditch diversification at the border.

"Home bias" is the term used to describe investors' tendency to tilt their portfolios in favour of stocks listed on their domestic stock market (bonds, too, but I'm going to focus on stocks).

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About Author

Ben Johnson, CFA

Ben Johnson, CFA  Ben Johnson, CFA, is director of global ETF research for Morningstar and editor of Morningstar ETFInvestor, a monthly newsletter.