Are Australian investors too focused on their own backyard?
Recent studies highlight a concerning trend in retail investor portfolios - extreme home bias and lack of diversification.
1- Retail investors still own nearly 50% of stock markets in many developed countries, including Australia.
2- The average retail investor has 85%+ of their direct stock holdings in domestic shares.
3- A Swiss study found retail portfolios averaged just 7 individual stocks, but these made up over 36% of total holdings.
Many investors rely heavily on products from a single institution, creating another form of concentration risk.
While familiarity with local markets is natural, this level of home bias can significantly increase portfolio risk and limit returns.
Sources - Ines Chaib from the University of Geneva & VZ Vermögenszentrum
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