Canadian Home Bias: What is optimal home bias allocation? [$467,000 Stock Investment Portfolio🍁]

Home bias is a recognized global phenomenon where investors intentionally overweight domestic holdings at the expense of foreign securities. Recently, Dan shared on Blossom an excellent research from Vanguard Canada where it talks about the importance of global diversification as a crucial way for investors to reduce portfolio risk over time. The article uses minimum variance analysis to determine an optimal home bias allocation. Based on its finding, "the optimal asset allocation for Canadian investors is a 30% allocation to Canadian equities and a 70% allocation to international equities because it has shown to minimize the long-term volatility of their portfolio". This is based on minimum variance analysis on historical data from January 1999 to June 2022. Now I admit, I need to do more reading to fully understand the methodology used in the article, but this finding stood out the most for me. In this video, I share the highlights from the article and provide a quick overview of the simple investment portfolio that my wife and I have with only 3 funds: XEQT, VT, and VTI, currently with a market value of approximately $467,000.

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