The Wall Street Journal recently posted some interesting facts and observations concerning investing in foreign stocks. In the article, it talks about the fact that a great deal of 401(k) accounts lack any foreign focus in terms of either mutual funds, etf’s or stocks.
“Many investors show a preference for the stocks of their own countries, which is called ‘home bias’, but this could ultimately hurt portfolio performance.”
The article goes on to say:
“They may be missing out. Experts say a stock portfolio that is widely diversified internationally can provide protection against a prolonged downturn in an investor’s home market. In addition, some market analysts say U.S. stocks look relatively expensive and many foreign markets appear less pricey, which could increase their chances of outperforming in coming years.”
Many investors show a preference for the stocks of their own countries, which is called “home bias”, but this could ultimately hurt portfolio performance. Many experts actually believe that you can reduce your overall portfolio risk if you are diversified globally.
Africa-focused stocks certainly have a place in incorporating foreign stocks into one’s portfolio. While there are varying views on how much emerging markets and frontier stocks should be in your portfolio, most experts agree that they should be in there to some degree. This article, reading between the lines, may advocate a portfolio having around 11% in emerging markets/frontier stocks, but nevertheless implies having some position in these stocks, and most of them do not.
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