Investing close to home, a Franco-French idea? Not really. This is a trend identified by the academic work of behavioral finance, a discipline that integrates the psychological dimension into the work of classical economists. Its name: the local bias.
“Studies have shown that 30% of an American’s stock portfolio is invested within a radius of 400 kilometers around his home. We observe the same phenomenon elsewhere, in Sweden, Finland or China., explains Daniel Haguet, professor of finance at Edhec Business School. This bias is also found at the national level: the Americans prefer to invest in American equities, the Germans in Germany, the Japanese in Japan.
The local prism goes hand in hand with another flaw identified by the researchers: the familiarity bias. “It is an illusion of competence: we believe that we know well what is close to us and that it is therefore less risky to invest close to home rather than buying shares in a multinational. It’s not always accurate”adds Daniel Haguet.
Why can these biases be dangerous? “The economic theory is very clear: you have to diversify your wealth. Whatever your region of origin, and even if it is very dynamic, the ideal is to distribute your investments geographically and in different sectors”continues Mr. Haguet.
Vigilance and objectivity
Nothing prevents you from making local investments, provided you remain vigilant about the risk involved. The question does not arise for regional savings accounts since the saver cannot lose his capital. On the other hand, crowdfunding and private equity, which both allow you to invest in local businesses, or even the purchase of real estate involve risk taking. The investment decision must therefore be made objectively.
Karim Essemiani, the founder of the Breton crowdfunding platform GwenneG, is realistic: “Just because a project is Breton doesn’t mean you have to invest in it! Moreover, we refuse 96% of the files that come to us in order to present savers only with the most serious projects, which can both create local jobs and ensure a return for the investor. »
Same reasoning for real estate. ” Avoid putting affect in a rental property investment. It is sometimes more interesting to buy elsewhere than in your favorite region if the market is more favorable there », recalls Stéphane van Huffel, founder of the Netinvestment platform. An investment is made with the head, not with the heart.