Why it pays to branch out abroad

Adding foreign shares to a portfolio is a useful way to reduce investment risks. Matthew Partridge explains why.

Even in today's globalised world, individual investors have a strong preference for companies listed in their home countries. Around 90% of the shares held by individual Americans are listed on US exchanges, according to the National Bureau of Economic Research, while only a quarter of money held in funds is put into those funds invested in assets outside the US.

On the surface, British investors appear to be a bit more adventurous: around half the money invested in UK-based equity funds is invested in international stocks, according to Investment Association data. However, given that the British stockmarket accounts for only 10% of listed shares around the world by market capitalisation, then this "home bias" is even stronger.

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Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri