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From the time that I left university and started work in 1974, I have been saving and investing. I began investing internationally relatively early on.

When I talk with others about their investing behaviour, I am always struck by people's reluctance to invest outside the UK. I regard this as a mistake.

Amongst writers on finance, this behaviour has a name: "Home country bias."

I wrote about it in the April 2026 UKSA Newsletter. You can read it below.

Why I don’t prioritise UK investments

Introduction

Over the last year there has been much talk from the Government and some commentators about the desirability of making pension funds (and possibly other investors) give more priority to investing in UK companies than they would otherwise choose to do.

This short paper summarises my perspective and how I actually invest.

Relevant personal history

My first investments in the mid-1970s were in unit trusts (open-ended mutual funds.) When I started buying individual shares, I did so through the bank which provided by current account. I began by investing in companies I had heard about such as Marks & Spencer. I suspect most people select their first shares the same way.

At that time, investing overseas was highly problematical, not least due to exchange controls.

In the early 1980’s I progressed to using stockbrokers directly. These stockbrokers were of course UK focused. My first contact with overseas stockbrokers was when I responded to a classified ad for “International Discount Brokers” in a magazine. This led to a relationship with a broker who then moved to a different US brokerage, Bache, later taken over by the USA’s Prudential Corporation.

Accordingly, by the age of 35 I was investing small amounts of money (low hundreds of pounds) in relatively exotic investments such as stripped US government bonds, currency options and traded equity options.

My pension savings at that time were not under my direct control. However, in the mid-1990s, I transferred them into SIPPs, initially with Alliance Trust Savings Ltd and with AJ Bell. These were also almost entirely UK focused. My third SIPP was with E*Trade, which after some ownership changes is now Interactive Investor.

The key point for me about Interactive Investor is that they offer foreign currency cash accounts which makes investing in overseas shares economically realistic. Otherwise, you suffer excessive costs of currency conversion into and out of sterling each time you sell or buy a foreign share.

Current situation

I don’t know the geographical distribution of my portfolio since I don’t track its distribution. However, the portfolio falls into the following broad categories (not necessarily in size order):

• Investments which are inherently global such as ETFs, OEICs, or investment trusts whose mandate is to either track a global index or to actively manage on a global basis.
• Investment trusts that focus on emerging markets.
• Investment trusts focusing on Europe.
• Individual companies listed in the USA, Hong Kong, Singapore, Europe.
• Investment trusts focusing on UK smaller companies
• Individual companies listed in London.

Simply by virtue of some very long-term holdings such as Rolls-Royce and 3i which have grown significantly in value over the decades that I have held them, the UK is still a much larger percentage of my total portfolio than would be justified by the UK’s derisory 4% weight in global stock markets.

However, the key point is that when selecting a new investment (or deciding to sell an existing investment), I accord the UK absolutely no privilege.

I am unconcerned that foreign investments can change in value due to currency fluctuations even if the foreign currency share price is static. My attitude is that in the long run, currency fluctuations broadly cancel out. If anything, over the decades, sterling tends to be on a long-term downtrend.

Philosophical view

My only purpose in investing is to produce investment returns for myself.

I do have some ethical principles. I have never purchased a tobacco company. I sold out of Coca-Cola and McDonald’s because I disapproved of what they peddle. I have never bought shares in a casino or in a company that exploits low-income borrowers by making expensive small loans to them etc.

I don’t believe that my avoiding such companies changes the world – it is simply a personal principle that I don’t wish to be an owner of such businesses.

It is no part of my investment purpose to help the companies whose shares I own. (I do normally take up rights issues because I regard doing so as sensible purely from an investment point.)

I regard what is referred to as “home country bias” as inherently foolish, although I recognise that it is understandable in the same way that people do many other silly things.

In particular, home country bias increases your concentration risk since you are already heavily dependent for your financial future on the economic success of your home country so it is better to diversify your risks by investing outside your home country.

Consider for example a Japanese individual wholly invested in the Japanese stock market in the late 1980s. For the next 30 years, his pay rises suffered from the poor performance of the Japanese economy while his shares suffered because the Japanese stock market went nowhere. He was not diversified!

The only logical reason for investing in your home country is that you may have a better understanding of the companies located there due to being more familiar with them. However, in practice such “better understanding” is usually illusory!

Mohammed Amin is a member of the UKSA Policy Team. He is writing in a personal capacity.