Studies show that Australians suffer from a particularly acute case of home bias when it comes to share investing, typically allocating 50% or more of their equity portfolio to the domestic market. There are plenty of justifications for being overweight on domestic equities: familiarity with the economic and regulatory environment of the home market, easier and cheaper access, favourable tax treatments (e.g. franking credits), and the fact that Australia has had an unprecedented 25 year bull market.
But a strong home bias can mean opportunity costs and an overly concentrated portfolio can entail significant risk. When it comes to saving and investing for future retirement, having all of one’s eggs in one basket is less than ideal.