Global Diversification: Why UK Investors Shouldn’t Put All Their Money in British Companies
It is entirely natural for a UK investor to gravitate towards UK companies. You recognise the names. You shop at their supermarkets, bank with their high street brands, fill your car at their petrol stations and see their logos on the side of vans every day. The FTSE 100 feels familiar and accessible in a way that South Korean semiconductor firms, Brazilian consumer companies or Indian technology businesses simply do not. This familiarity can feel like a sound basis for investment decisions — but when it comes to building a long-term portfolio, it is a cognitive bias that has a formal name in behavioural finance and a well-documented cost: home bias.
The United Kingdom accounts for roughly 4% of global stock market capitalisation. If you hold only UK equities, you are voluntarily excluding 96% of the world’s investable stock market from your portfolio. More significantly, you are concentrating your entire financial future on the performance of a single economy, a single currency, and a relatively narrow set of sectors that happen to dominate the FTSE 100 for historical rather than forward-looking reasons. In this explainer we look at what home bias actually costs, what the FTSE 100 genuinely represents as an index, why global diversification is one of the most powerful risk-management tools available to any investor, and how to implement it practically and cheaply from the UK.
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