Slightly more than half of the value of the global stock market resides in non-U.S. firms, with the remainder in U.S.-domiciled companies. In reality, however, few U.S. investors mirror the global market's breakdown between foreign and U.S. companies; most investors have a bias toward their home country.
Posting on the Portfolio Design/Management forum of Morningstar.com's Discuss boards, I recently asked Morningstar.com readers to share how global they've made their portfolios. In response, many posters noted that they had a "home-country bias" with 2-to-1 and 3-to-1 ratios in their equity portfolios (meaning that their portfolios held between one third and one fourth of their equity assets in foreign firms with the rest in the U.S). Others said that they were running truly global portfolios. Some posters noted that they'd recently downplayed foreign markets because of uncertainty about the euro crisis and other macroeconomic factors, while bargain-hunters said that they'd recently upped their foreign allocations in the view that valuations were more attractive overseas than in the U.S. Finally, some readers noted that distinguishing U.S. and foreign companies by country of domicile is an outdated concept: Where companies earn their revenues is a better representation of their geographic positioning... read more.
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