Late last month a dad from Cyrus’ (my son) school invited me to join a couple of other fathers to watch the second rugby league match between the Waratahs and the Lions in a local pub.
Normally I would politely decline the invitation. I’m not a rugby fan, and I rarely watch sport for that matter.
However, I accepted the invite because of the company. I’ve become good friends with a couple of them..
The night turned out to be quite enjoyable. If you watched that match, you’d say so too. Especially if you’re a Lions fan. The team clinched victory with a last-minute try moments before the full-time whistle blew.
You can imagine that many across Australia were disappointed with the outcome. They were Waratahs fans. People naturally barrack for their own. There was home-ground advantage, but to no avail.
Home bias and investing
What I’m writing about today isn’t about rugby matches. But that story is relevant.
I want to talk about home bias. It happens in almost everything, investing included.
As an Australian, it’s typical that your investment portfolio comprises largely of Australian assets. Whether it’s real estate, shares, bonds, or cash, it’d be predominantly, if not entirely, based in Australia.
Why not? It’s convenient and prudent to invest in what you’re familiar with. Moreover, brokerage within Australia is cheaper. You don’t have to worry about exchange rates, legal matters, and time-zone differences.
I’ve got home bias in my investments. Even though gold and silver are internationally renowned assets, my holdings in gold, silver, and mining stocks are predominantly listed on the ASX.
I know that there is a wide world out there with lots to choose from. Almost 1,000 gold mining companies worldwide, compared to around 160 in Australia.
Given the benefits of broadening my horizon, what’s stopping me from branching out?
The hidden risks of international diversification
One of the most popular yet misunderstood concepts in investing is diversification. Many investment managers practise it, and there are volumes of books written about this concept. Anyone who studies finance will learn about this in their coursework.
However, not everyone can just diversify and see their investment returns improve. It sounds good on paper, but is easier said than done.
To diversify requires you to look at a wider range of assets. That requires time and different expertise if you want to choose the right assets to buy or sell. There are no shortcuts or magic formulae.
So invariably, many who diversify do so by buying stocks that they may not be familiar with or invest in regions that they don’t understand. They may get lucky with some stock picks but that might be an exception rather than a rule. What usually ends up happening is they’ll have trouble tracking all their stocks, with some holdings whittling away and dragging the portfolio down. This is especially the case if they buy the stocks that are the flavour of the month. They pay too much for them because other investors bid them up. When these stocks are no longer in favour, the share price could collapse.
Get an investment tour guide, and one with a fine track record
When you go travelling, you rarely go unprepared. Some join tour groups, others hire a tour guide, while some read up about the attractions and how to get from one place to another.
Investing should be the same. Failing to prepare is preparing to fail.
If you want to get the most out of investing outside of Australia, you know it involves work. You can buy ETFs of international equities or delve into specific regions and search the companies to invest in.
Or you can hand it to someone who can do that for you. He or she’ll search the markets, identify what sectors/industries hold good potential, and filter the right companies for you.
My colleague, Murray Dawes, has put his hand up to do this. I don’t think he needs an introduction.
But just in case you don’t know, Muzz has decades of experience as a trader. He’s helped many readers secure significant gains using his charting and stock analysis.
We’ve seen several industries perform well in the past few years – critical minerals, gold, tech stocks, uranium, industrials, and so on. Muzz was on top of them. He picked the entries and exits masterfully, with many of his readers expressing satisfaction with his guidance.
He’s decided to ‘go north’ out of Australia to apply his skills to a wider field.
Given that the US markets (among others) have made new highs, far more than that in our markets, perhaps this is the right time to get started.
To learn more about this latest service and our special offer, click here.
If you’ve been waiting to invest outside of Australia, this may be your calling. All aboard!
God Bless,
Brian Chu,
Gold Stock Pro and The Australian Gold Report
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