The US stock market is still bigger than all the rest combined, representing 57% of the world’s stock marketing capitalization. This combined with the fact that we are simply more comfortable investing in companies that are located in our country than those that are located abroad contributes to what is referred to as a domestic bias.
This domestic bias can be further encouraged when geopolitical events such as Russia’s invasion of Ukraine are added to the investing environment. It is hard enough to keep track of what is happening in our own country, let alone the rest of the world. But, if as Americans, we limit our investments to only US companies, we run the risk of missing the performance available from almost half of the world’s economy. How can we balance the risk and potential return?
The attached article “Navigating Geopolitical Events” from Dimensional Fund Advisors summarizes the specific actions that have been taken considering the most recent Russian aggression and more broadly the strategies and actions they use to help mitigate risks of investing internationally while attempting to capture the returns that are available there.
To find out how we can help you transform the complexity and confusion surrounding this important topic into your improve WealthConfidence, call us today at (321)773-7773 to schedule your free initial consultation with one of our WealthCoaches™. For more information about FirstWave Financial check out our website at www.firstwavefinancial.com
Source: Umland, Karen. “Navigating Geopolitical Events.” Dimensional Fund Advisors LP, March 4, 2022, https://www.dimensional.com/us-en/insights/navigating-geopolitical-events
Dimensional Fund Advisors LP.
In USD. Market cap data is free-float adjusted and meets minimum liquidity and listing requirements. Dimensional makes case-by-case determinations about the suitability of investing in each emerging market, making considerations that include local market accessibility, government stability, and property rights before making investments. China A-Shares that are available for foreign investors through the Hong Kong Stock Connect program are included in China. 30% foreign ownership limit and 25% inclusion factor are applied to China A-Shares. Many nations not displayed. Totals may not equal 100% due to rounding. For educational purposes; should not be used as investment advice. Data provided by Bloomberg.