There have been many studies conducted on the psychology of investors, identifying the common biases that people succumb to when managing their portfolios.
One key bias we see in many portfolios is termed “Familiarity Bias” which can cause investors to concentrate too heavily on opportunities in their own country. The familiarity with local companies and investments leads many to forego the countless opportunities that are available around the globe.
The Australian share market makes up somewhere in the order of 2% of the entire global sharemarket and therefore a firm focus on Australia can see you miss out on investments in the world’s biggest and most successful companies and brands.
Even with the advent of Exchange Traded Funds, which enable investors to target specific markets in a low cost, diversified manner through the Australian Stock Exchange, the heavy focus on Australia has remained…and over time this can be detrimental to your portfolio.
Psychological Biases can be deep seated and difficult to overcome without ongoing support and education, which is why at Segue we take the time with investors to educate them on investment opportunities and link these back to their short and long term objectives, resulting in a portfolio that is well placed to take advantage of appropriate opportunities wherever they may come from.