Less Can Be More When It Comes to Overseas Stocks - New York Times

The "Home Country Bias" is the finding that investors invest more in their home country than would be justified on a risk-return basis. Today's NY Times suggests that this bias may be growing less powerful.

Less Can Be More When It Comes to Overseas Stocks - New York Times:

"So far this year, about 70 cents of every new dollar invested in equity funds has been directed to internationally oriented portfolios, according to the mutual fund tracker AMG Data Services. And emerging-market stock funds — by far the hottest foreign category — have pulled in more new money in the first three months of 2006 than they did in all of 2003, 2004 and 2005 combined."

"Having some foreign exposure clearly helps diversify a portfolio. From 1970 to 2005, a portfolio invested entirely in domestic stocks had a standard deviation — a popular measure of volatility — of 16.8 percent, according to S.& P. By comparison, a portfolio that was 75 percent invested in domestic stocks and 25 percent in foreign shares had a standard deviation of 16.4 percent, implying a slightly less bumpy ride."