Investors everywhere own far more of their home country's companies than any sensible allocation would call for, and they do it in every country, which tells you the reason has nothing to do with which country it is.
If an investor spread their money across the world's companies in proportion to their actual value, they'd end up scattered across dozens of countries, each getting a share that matched its slice of the global market. Almost nobody does this. Investors in every country studied hold far more of their own market than that calculation would justify, and the pattern is consistent enough to have earned its own name: home bias.
The universality is the most telling part. If investors in one country overweighted their home market, you might guess they'd spotted something genuinely attractive about it. But investors in every country do this, and they can't all be right, because their conclusions contradict each other. Two investors, each convinced their own market deserves an outsized allocation, are not both making a sound assessment of the same world.
The real explanation is familiarity, and familiarity isn't information. People know the companies in their own country. They see the brands, read about the businesses in their own news, understand the language the reports are written in, and have some intuitive sense of how the economy is doing. That produces a feeling of understanding, and the feeling gets mistaken for actual knowledge that confers an edge. Usually it doesn't.
There are legitimate reasons for some home tilt, and they should be acknowledged before the criticism continues. Future obligations are usually denominated in your own currency, so holding assets in that currency avoids the risk of an inconvenient exchange-rate move. Domestic holdings sometimes carry tax advantages, and the cost of accessing foreign markets, while much lower than it used to be, isn't always zero. These considerations justify some tilt. They don't come close to justifying the size of the tilt actually observed in practice.
The cost of the bias is that it quietly turns a portfolio that looks diversified into a concentrated bet on one economy, one currency, one regulatory regime, and one mix of industries. An investor holding fifty domestic companies feels diversified, because they own fifty things. They're protected against any single company failing. They have no protection whatsoever against anything that hits the country as a whole, and the events that damage portfolios most severely are usually exactly that kind.
This is where the Japanese experience, discussed elsewhere in this series, stops being a history lesson and becomes directly relevant. A Japanese investor in 1989 holding a broad basket of domestic companies would have felt perfectly diversified by every measure they had access to, dozens of businesses, many industries. What they actually held was a single position in the Japanese economy, and it took roughly thirty-four years to get back to where it started. An investor holding a globally spread portfolio lived through the same stretch of time in a completely different way.
The uncomfortable part is that feeling most confident about your home market doesn't protect you from this. The Japanese consensus of the late 1980s wasn't held by fools; it was the considered view of informed people who understood their own economy far better than any outsider did. Their superior familiarity didn't save them. If anything, it's part of what persuaded them to concentrate as heavily as they did.
The bias gets reinforced by how market information is presented, and it's worth noticing because it works quietly, below the level of conscious attention. The news in any given country reports its own index as though it were the market. Commentary discusses domestic companies as though they were the whole available universe. Nobody's lying to the investor absorbing this coverage, but they're being shown a narrow slice of the world, day after day, until mistaking it for the whole thing stops feeling like a mistake at all.
The fix is easy to state and requires no forecasting skill whatsoever, which is exactly what makes it appealing. An investor can hold a globally diversified allocation through cheap, widely available funds, and doing so requires no view at all about which countries will do well. It requires only admitting that you don't know, and that concentrating in the one market you happened to be born near isn't a conclusion you arrived at by analysis.
Global diversification isn't a guarantee of anything, and it shouldn't be marketed as one. Markets around the world have grown more connected, and in severe crises they've tended to fall together, which weakens exactly the protection you'd want most in that moment. What global diversification actually guards against isn't a bad year everywhere at once. It guards against a bad thirty years in one place, which is the kind of risk that actually derails a financial plan.
There's a smaller-scale version of the same bias that deserves mention, because it can do considerably more damage. Employees often hold large amounts of stock in the company that employs them, sometimes through workplace plans and sometimes bought deliberately out of familiarity and loyalty. That concentrates two entirely separate risks into one source. If the company runs into serious trouble, the employee can lose their paycheck and a large chunk of their savings at the same time, precisely when they need the savings most. The familiarity that makes the holding feel safe is the same familiarity that produced the concentration in the first place, and it offers zero protection against the event that actually matters. This is home bias at its most concentrated, and it has wrecked a great many people who thought they simply understood their own employer well.
VESTFY™ treats home bias as the most widespread, least examined concentration ordinary investors carry. It doesn't feel like a bet. It feels like prudence, sticking to what you know, and that feeling is exactly what lets it survive, unexamined, inside portfolios that are otherwise carefully built.