U.S. Investment Bias for Americans Living Internationally
We have found through our work with American citizens living a global lifestyle that many tend to invest with a consistent bias toward the U.S. in both stock and bonds. Some of this is likely a result of the biases of their financial advisors along with the long-running outperformance of the U.S. market compared with the rest of the world. However, much is also due to a natural preference for one’s country of birth, which really comes down to emotion.
We at Maxim believe strongly that while the U.S. is still a very strong and important economy, it’s standing as the dominant economic engine of the world is eroding and therefore all investors should begin to view the U.S. as simply one component of a globally diversified portfolio.
It is particularly important to Americans living abroad to adjust their investment mindset, as the risks to them are great. The most obvious risk of favoring U.S. investments is that their assets are heavily exposed to the economy of United States, even while their lifestyle is predominantly lived elsewhere. A related risk is that the investor’s wealth is too tied to the dollar. This has been particularly painful over the past few years as the dollar has weakened dramatically. Finally, investing more of your wealth abroad should yield improved investment opportunities and greater portfolio diversification, which ultimately will add return while lowering risk in your portfolio.
Source: Maxim Global Wealth Advisors, By Andrew Fisher, CFA, CPA – 2008
Investment Management
