Home bias: should you invest in your own country's stock market?

Investors in almost every country put far more money into their home stock market than its size in the world would justify. It’s called home bias, and it’s especially common in smaller markets.

Why it happens

• Familiarity: you know the local banks, energy companies and supermarkets.
• Access and cost: local shares can be cheaper and simpler to buy, with tax handled automatically.
• Currency comfort: no exchange-rate worries.
• Patriotism, and sometimes tax incentives for local investing.

Why it’s risky

Your home market may be a tiny slice of the world. Most single countries make up only a small percentage of global stock market value, and many smaller markets are dominated by a few companies or sectors — often banks and energy.

You’re also already exposed to your country through your job, your home and your pension. If the local economy struggles, your portfolio would fall at the same time as your income is at risk.

History has examples of whole markets lagging for decades, while the world as a whole moved on.

How much should stay at home?

There’s no single right answer, but a few reasonable approaches:

• Market weight: hold the world as it is, with your country at its true global share.
• Modest tilt: hold a global fund for most of your money, plus a smaller slice (say 10–20%) in your home market for familiarity, lower costs or tax advantages.
• Use local where it’s smarter: for example, local government bonds for your safe money, global stocks for growth.

Practical tips

• A global ETF is the simplest way to avoid accidental home bias.
• If your country offers tax-advantaged accounts limited to local assets, weigh the tax saving against the concentration.
• Check your country page for local options and costs.

The short version

Liking your home market is natural. Just don’t let it be your whole portfolio — the world is a much bigger place to invest.