When Your Country Collapses, Where Do You Invest?

THE YOUNG INVESTOR

becoming a great investor one mistake a time

There’s a strange obsession with the apocalypse, especially the U.S.

Aliens always land there.

Civil wars always start there.

That meteorite or ice storm? It’s obviously headed straight for New York City 🤣

That’s probably why some Americans build bunkers and stockpile guns and gold.

But what does this have to do with investing?

Well… a lot.

Underneath the bunkers and bullion is a more basic fear, one most of us share around the world:

What happens if my country collapses? Where do I put my money? How do I protect what I’ve built?

And if you want to understand how people actually invest, not how they say they invest, you have to start with this fear.

It leads us to one of the most common, most misunderstood investing mistakes out there:

Home country bias.

We Invest Where We Live

Home country bias is a well-documented behavioral trap.

It’s the tendency for investors to allocate far too much of their investment capital in their own country, relative to the investable universe.

It’s not irrational.

We like to invest in what we know. In what’s around us.

And I’m just talking about stocks and bonds.

When you add your house, your job, your business, your rental property, your local bank account, you’re even more massively long on your own country than you think.

And still, most investors keep pouring into their home markets like the rest of the world doesn’t even exist.

Let’s quantify this:

• Americans put 80%+ of their equity portfolios in U.S. stocks, even though the U.S. is about ~60% of global markets.

• Canadians? Worse. Their market is ~3% globally, but many portfolios are 60%+ Canada.

• Australian and Japanese investors? Still holding 50–70% domestic.

And these are people in sophisticated developed countries. Pretty safe places.

Imagine what a huge mistake this is for people in the rest of the world?

In short: the data is clear, we all think we’re diversified, but we’re not.

A Gift for Americans

For U.S. investors, home country bias has been a gift over the last fifteen years.

They’ve had a tech-fueled rocket ride.

The Nasdaq ate the world.

The dollar stayed strong.

U.S. markets outperformed everything. By a lot.

Along the way, a rotating cast of well-known fund managers kept screaming that international stocks were super cheap compared to the U.S.

They warned of an imminent comeback for international and emerging markets.

Which clearly did not occur.

So it’s no surprise:

• Americans ditched global diversification.

• Smart international investors abroad gave up on their own markets to go all-in on the U.S.

So, should we all just go all-in on the U.S.?

Hold that thought.

What About the Rest of the World

What if you're not American?

What if your country doesn't have global tech giants?

What if your currency weakens another 20% in a few years?

What if your government seizes your assets?

What if your retirement account is on a local pension fund that’s 80% invested in your local stock market, and your local stock market is shit?

That’s not hypothetical.

That’s Venezuela. That’s Turkey. That’s Argentina. That’s Lebanon. That’s Nigeria. That’s Sri Lanka.

And the list continues.

Even in Canada or Europe, currency weakness, concentrated markets, and regulation are real risks. Just more politely disguised.

The World Is More Open, But Also More Crowded

One thing has changed in the past ten years:

As an investor you have better access to foreign markets, better data, and more tools to diversify than ever.

So there is little excuse for home country bias.

But that access also works both ways.

Capital from around the world has flooded into the U.S., chasing safety, liquidity, and tech dominance. That demand has helped inflate valuations and probably lowered future returns on U.S. equities in the process.

So now we’re in a weird place where:

• U.S. investors are overexposed to the U.S.

• Some Global investors are all-in the U.S.

• Some Global investors are still stuck in home country bias planet.

And everyone thinks they’re diversified.

Some Takeaways

If you're in the U.S., or outside the U.S. you're probably holding more local risk than you realize.

Barry Ritholtz, investor and behavioral finance commentator, suggests the following:

What does good global diversification actually looks like?

Benchmark off the MSCI All Country World Index (ACWI)

It holds 99% of the investable equity universe globally. And weights countries based on their real market size.

Right now that comes out to roughly 60% U.S., 40% international:

A final thought:

How did people from countries that blew up (Argentina, Lebanon, Venezuela, Iran…) manage to stay wealthy?

Most of them had one thing in common. They were diversified globally.

A good chunk of their wealth was compounding in assets located in the major world markets (whether that was US dollar, Euro, Swiss Franc…)

Diversification isn’t about guessing which countries will outperform. It’s about owning a slice of the whole thing and letting the market sort it out.

If your home country enters crisis, a global portfolio can weather it.

Can you say that about your current portfolio of assets?

thanks for reading,

Al Atencio