Familiarity Breeds Overconfidence

It is a fact that you are more likely to bet on a sport which you are familiar with. The same holds true with investing. When investing, people are likely to invest in stocks they are familiar with, and they perceive the unknown as too risky. This common phenomena most likely explains why investors tend to stay domestic when choosing stocks for their portfolio. Are international securities riskier than U.S. securities? Not at all. If investors would make an effort to familiarize themselves with foreign companies and markets, then they would see for themselves all the potential international markets possess. Do not let lack of familiarity shy you away from investing in foreign securities. Contrary to popular belief, diversifying with foreign securities is a great way to hedge risk in your portfolio. Familiarize yourselves and go global investors!