21 min
Investing and the Vegemite Effect FinTalking
-
- Investing
Have our patriotic ways spilled over to our investment portfolios with Aussie equities representing a disproportionately large component of our investment portfolios?
Do you gravitate to investing in companies you know and like?
Might you suffer from the Vegemite effect, investing perhaps more than you should in local markets?
In this episode, we consider home bias and explore how investing in our beloved Australia might have unintended consequences, encouraging you to try other types of spreads.
SHOW NOTES
00:27 Australians are really patriotic people. As a country, we take great pride in supporting our local communities and we have that affinity for Australian produced products like Vegemite.
01:21 Mark Zuckerberg, CEO of Facebook, wears grey t-shirts all the time, it's an efficiency gain because he wants to minimise those more superficial decisions so he can focus on the ones that matter. And this is kind of the same in investing.
02:18 There's a lot of behavioural biases and home bias or familiarity bias is one to watch out for.
03:00 In an earlier episode - who can you trust? We raised Enron as an example. Employees not only lost their jobs, but a large amount of their retirement savings had been invested in Enron stock as well. This is a reminder familiarity bias can work against you.
05:32 Did you notice that the daily news always has a component on the stock market movements?
06:23 Australian market is highly concentrated. The All Ordinaries, the top 10 stocks account for roughly 37% of the total index.
08:04 Australia is a small equity market, like 2 or 3% of the size of global market cap.
10:07 An older study that was done in 1999, found Fund Managers suffer from this home bias as well.
12:46 In Australia we have franking credits that can incentivise investment in Australia because you're receiving a tax rebate based on the tax that has already been paid by the company on the dividend you receive.
13:28 The fact that there's negative gearing and also low interest rates has really seen people move to the Australian property market over time.
14:08 If you work as an individual for an Australian company, then your human capital is dependent on the Australian economy or that particular company doing well.
17:13 Home Bias is not just an Australian phenomena. It is global. In Japan, approximately 80% of Japanese investors invest into local Japanese companies. Yet Japan has only 9% market cap.
21:10 The power of diversification, a defense against home bias.
Have our patriotic ways spilled over to our investment portfolios with Aussie equities representing a disproportionately large component of our investment portfolios?
Do you gravitate to investing in companies you know and like?
Might you suffer from the Vegemite effect, investing perhaps more than you should in local markets?
In this episode, we consider home bias and explore how investing in our beloved Australia might have unintended consequences, encouraging you to try other types of spreads.
SHOW NOTES
00:27 Australians are really patriotic people. As a country, we take great pride in supporting our local communities and we have that affinity for Australian produced products like Vegemite.
01:21 Mark Zuckerberg, CEO of Facebook, wears grey t-shirts all the time, it's an efficiency gain because he wants to minimise those more superficial decisions so he can focus on the ones that matter. And this is kind of the same in investing.
02:18 There's a lot of behavioural biases and home bias or familiarity bias is one to watch out for.
03:00 In an earlier episode - who can you trust? We raised Enron as an example. Employees not only lost their jobs, but a large amount of their retirement savings had been invested in Enron stock as well. This is a reminder familiarity bias can work against you.
05:32 Did you notice that the daily news always has a component on the stock market movements?
06:23 Australian market is highly concentrated. The All Ordinaries, the top 10 stocks account for roughly 37% of the total index.
08:04 Australia is a small equity market, like 2 or 3% of the size of global market cap.
10:07 An older study that was done in 1999, found Fund Managers suffer from this home bias as well.
12:46 In Australia we have franking credits that can incentivise investment in Australia because you're receiving a tax rebate based on the tax that has already been paid by the company on the dividend you receive.
13:28 The fact that there's negative gearing and also low interest rates has really seen people move to the Australian property market over time.
14:08 If you work as an individual for an Australian company, then your human capital is dependent on the Australian economy or that particular company doing well.
17:13 Home Bias is not just an Australian phenomena. It is global. In Japan, approximately 80% of Japanese investors invest into local Japanese companies. Yet Japan has only 9% market cap.
21:10 The power of diversification, a defense against home bias.
21 min