International investing and home bias
International investments can help you diversify your portfolio, but many investors overlook them. This video can help you avoid the pitfalls of home bias in your investments.
Investing is a journey, but it doesn’t have to be a journey you make alone. We spent 5 years studying millions of Vanguard households to help bring investors together and share what they’ve learned along the way. One of the most important lessons is that diversification is one of the keys to successful investing. There are many ways you can diversify your portfolio. One way is to select both domestic and international investments.
But our research shows that a lot of people overlook international investments, instead choosing to focus on companies based in their home countries. We call this “home bias.”
Experts say it’s a good idea to aim for a specific percentage of international investments to help control the overall risk level of your portfolio. What’s that magic number? Vanguard advisor Lauren Wybar says it’s between 30 and 50% of your total stock portfolio.
So what can you do to add more stamps to your portfolio’s passport? For starters, consider advice. We found that investors who receive professional financial advice are more likely to hold international investments, to the tune of 36% of their total assets (compared with 18% among their non-advised peers). It’s something to think about as you plan your next moves.
But if you’re more comfortable managing your own investments, just remember that international holdings are an important part of a diversified portfolio. Be sure to make them a part of your financial plan.
All investing is subject to risk, including the possible loss of the money you invest. Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.
Diversification does not ensure a profit or protect against a loss.