When it comes to building a strong investment portfolio, many high earners start with the same logic they apply to the rest of their financial lives: stick with what you know. For Americans, that often means investing heavily in U.S. companies—household names, blue-chip stocks, big-name mutual funds. And on the surface, that can feel like a safe, smart strategy.
You’ve got a good mix of U.S. stocks, maybe some bonds, possibly a few sector-specific funds. Isn’t that diversified?
Well… not quite.
True diversification runs deeper than surface variety. It’s not just about how many investments you hold—it’s about where and what those investments are. And if they all live in the same market (or worse, the same few sectors), your portfolio may be a lot more fragile than it looks.
Let’s Talk About Home Bias
Home bias is the tendency to invest in companies that feel familiar—those headquartered in your home country, or even companies you interact with daily. Think of the major players in the U.S. stock market—names that dominate your newsfeed or appear in your shopping cart. These companies have certainly had impressive runs. But when your portfolio leans too heavily on just one country—especially one set of industries—you end up with a concentrated bet, not a balanced plan.
Zoom out, and the global market tells a different story. The U.S. represents roughly 60% of the total global market. That means if your investments are entirely domestic, you’re leaving nearly half of the world’s market opportunities untapped.
Diversification Isn’t Just a Buzzword
At its core, diversification is about managing risk—and opening the door to a wider world of potential returns. When you diversify across countries, industries, and asset classes, you’re not just increasing the number of holdings in your portfolio. You’re reducing your exposure to the ups and downs of any one market, political system, or economic cycle.
Picture a balanced portfolio as a three-legged stool. One leg might be U.S. equities. Another could be international developed markets—think Europe, Japan, Australia. The third? Emerging markets like India, Brazil, and Vietnam. If one leg wobbles, the others provide stability.
And here’s the part that’s often overlooked: global diversification doesn’t just reduce risk—it can also improve performance. By spreading investments across different regions with different growth patterns and economic drivers, you’re positioned to benefit from a broader range of opportunities over time.
The Numbers Back It Up
In a recent video we shared, we compared the performance of two different approaches: investing solely in the U.S. market (represented by the S&P 500 Index) and investing globally (using the MSCI All Country World Index IMI). While the S&P has outperformed at times, it’s not a consistent winner—and there have been entire decades where international markets delivered stronger returns.
A globally diversified investor doesn’t need to guess which market will lead next. They’re already positioned to benefit from it.
A Note on Volatility
No investment strategy eliminates risk entirely. But diversification helps manage the type of risk you’re exposed to. Market volatility is a given, but concentrated portfolios often experience sharper swings. A diversified portfolio, especially one that spans global markets, tends to be more resilient—offering a smoother ride even when things get bumpy.
This matters not just for your peace of mind, but for your long-term results. Investors who panic and sell during downturns often miss the recovery. Diversification helps keep portfolios (and investors) on a steadier path—making it easier to stick to the plan and stay invested through the cycle.
So, What Does Diversification Actually Look Like?
At Grunden Financial Advisory, Inc., we believe diversification means more than just owning a variety of tickers. It means thinking globally and holistically—considering where your money is working, what sectors and economies it’s tied to, and how each piece fits into your broader financial goals.
Here are a few principles we follow:
- Don’t Just Diversify Across Assets—Diversify Across Markets: A healthy mix of U.S., international developed, and emerging markets gives your portfolio access to different growth drivers and economic conditions.
- Think Beyond Equities: Bonds, real estate, and other asset classes can help balance the inherent volatility of stocks.
- Stay Consistent and Long-Term Focused: The goal isn’t to chase the market leader of the moment, but to stay positioned for steady growth across all environments.
- Rebalance Regularly: Over time, your portfolio can drift out of alignment as markets move. Periodic rebalancing helps ensure your risk exposure stays in line with your goals.
Final Thoughts: It’s a Big World—Invest Like It
It’s easy to fall into the trap of familiarity when investing. But just because something feels comfortable doesn’t mean it’s the smartest move for your long-term future. Real diversification asks you to look beyond your borders—to think bigger, wider, and longer term. By building a globally diversified portfolio, you’re not only reducing your exposure to concentrated risks—you’re giving yourself a chance to benefit from growth across the entire world.
If you’re wondering whether your current investment strategy is truly diversified—or if you’re just holding different flavors of the same risk—we’re here to help. Feel free to get in touch with our team to talk about your goals and learn how we can help you build a plan that’s strong, steady, and built for the long haul.
