Is Your Portfolio Too Close to Home?

One of our community members asked a question this week that so many of us have quietly wondered about.

She had heard the phrase "diversify geographically" in the book and on the bootcamp, but wasn't sure what it actually meant in practice.

Maybe that sounds simple enough, but when you start looking at funds you ask yourself, wait - does it matter where a company is headquartered? Where it's listed? Or where it earns its money? And what about a company like Netflix, which is American but streams in almost every country on earth?

It's a great question, and the answer is a little more nuanced than it first appears. Let's break it down.

What geographic diversification really means

At its heart, geographic diversification just means not putting all your eggs in one country's basket. Every country has its own economy, its own political climate, its own currency, and its own stock market. When things go wrong in one of those areas, for example a recession, a political crisis, or a currency shock, investments tied to that country can take a hit.

If your whole portfolio is concentrated in one country, you're exposed to all of those risks at once. Spreading your investments across different regions, say the US, Europe, and Asia, means that if one economy has a rough year, the others might be doing just fine. That balance is the whole point.

Headquarters, stock exchanges, and where companies earn money

Here's where it gets a little tricky, and where the Netflix example is really helpful.

Netflix is headquartered in the United States, listed on a US stock exchange, and its share price tends to move with the US market and the US tech sector. Its stock is fundamentally shaped by US market conditions - when US tech stocks have a bad day, Netflix tends to feel it. So even though it has subscribers all over the world and earns revenue globally, it is still considered a US investment.

That said, the fact that Netflix earns money from subscribers around the world does offer the company itself some cushion. If one market slows down, another might hold steady. But as an investor buying Netflix shares on a US exchange, your returns are still largely shaped by what's happening in the US market.

The company's global reach helps the business, but it doesn't fully replace the benefit of owning investments that are genuinely rooted in different economies.

So when you're thinking about geographic diversification, what matters most is typically where a company is based and listed, and which market forces drive its share price, not just where it happens to sell its products or services. A company can operate globally and still be deeply tied to one country's economy.

How to think about your own portfolio

Most of us naturally drift towards investing in companies and funds from our own country.

It feels familiar. We recognise the brand names, we understand the news, and it just feels safer.

But this tendency, sometimes called "home bias", can quietly leave your portfolio more concentrated than you'd like.

A simple way to check in with yourself: look at the funds or stocks you own and ask where they are primarily based and listed. For funds, you can also look at their regional or country breakdowns, which usually show how much is in the US, Europe, emerging markets, and so on.

If the answer is almost always the same country or region, that's worth noticing. You don't need to panic, but it's good information to have.

A more balanced portfolio might include funds that cover different regions, so your money has exposure to multiple economies rather than riding almost entirely on one.

The point is not perfection

You don’t need to track exactly which percentage of every company's revenue comes from which country. That would be exhausting, and it misses the point entirely.

The goal is to make sure your financial future isn't completely dependent on one country having a good run. And usually, owning a mix of funds across different regions is enough to get there.

Geographic diversification is really about giving your future self more options. You're not trying to predict which economy will perform best. You're just making sure that no single country's bad year has the power to derail your whole plan.

More ways to benefit from growth happening around the world, and fewer ways for one market's turbulence to undo everything you've worked towards.

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