Home investment bias flattening wealth
Australian investors' home country bias and fixation on yield may be responsible for diminishing their wealth in the short term, according to PM Capital.
Despite the US S&P500 performing seven per cent per annum better than Australia's All Ordinaries index over the five years to January 2014, investors are wrongly unwilling to tap into the market due to concerns about its performance over a 10-15 year period, PM Capital head of distribution, Rob Thompson, said.
"There are very clear diversification benefits and compelling valuation opportunities available off-shore for Australian investors," he said.
"There may also be an opportunity to minimise the risk of another yield trap."
Thompson felt the focus on yield was leading Australian investors astray and instead, they should be focused on the risk/reward proposition.
"The reality is that the strong focus on yield is distorting asset prices," he said.
"On many occasions the elements of yield are overvalued or receive too much focus at the expense of other important fundamentals that deserve greater consideration," he added.
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