For younger investors today, envisioning a time when the majority of investment portfolios were concentrated in the US and various international markets may seem difficult.

The S&P 500, a key indicator of the US stock market, forms the foundation of numerous investment strategies. Typically, US equities account for 60 to 70 percent of many global tracker funds. Even the Lindsell Train Global Equity fund, which is often underweight in the US, still allocates around 40 percent of its assets to American stocks, the largest of any single country.

However, just two decades ago, the scenario looked quite different for UK investors, who had a significantly dissimilar stock market focus. Historically, both individual investors and wealth management firms have exhibited a tendency known as “home bias,” favoring domestic stocks and bonds.

This pattern indicates that UK investors generally allocated more to UK stocks than might seem logical, or at least exhibited an “overweight” position compared to the country’s share of the global market. Presently, mixed-asset funds in the UK contain roughly 25 percent in domestic equities, a drastic decrease from as much as 65 percent in 2009.

In my latest investment decision, I am reinvigorating this “home bias,” particularly by focusing on a company whose headquarters I can see from my window.

Earlier this year, I determined it was time to include some defense sector exposure in my portfolio. With the political climate shifting and ongoing global tensions stemming from the war in Ukraine, it felt like a prudent move.

This investment would serve as one of my “satellite” holdings—about 80 percent of my total portfolio is allocated to a global tracker, complemented by four other niche investments that carry slightly higher risk.

However, my decision-making process faced a roadblock. After researching various defense firms and reviewing factsheets on defense funds to identify leading companies, I found no standout choice. Eventually, I leaned into my home bias and chose BAE Systems, the multinational defense contractor.

BAE Systems not only has a strong British identity but also operates its maritime hub in Cowes, the quaint seaside town where I reside on the Isle of Wight. With acquaintances employed there and a visible presence from my office, I felt a personal connection to the business.

Today, BAE Systems’ stock price has risen by 11 percent since my investment, validating my gut feeling about this choice.

According to Jason Hollands from Evelyn Partners, emotional connections play a significant role in investment decisions. He noted that many investors are drawn to companies that have strong operations in the UK or receive substantial media attention.

“Investors often feel they possess a clearer understanding of firms with a robust domestic footprint. Previously, major FTSE 100 companies were viewed as ‘British blue chips,’ instilling a sense of national pride that has since diminished,” he remarked.

This decline in home bias is understandable. The globalization of financial markets has led stock exchanges such as London and New York to be largely influenced by international firms, which no longer mirror domestic economies.

Previously, pension funds enjoyed tax credits on dividends from UK companies, and the early form of ISAs, known as personal equity plans (PEPs), were limited to UK equities. Following the replacement of PEPs with ISAs in 1999, investors gained the flexibility to diversify internationally, especially after the UK Chancellor, Gordon Brown, removed tax credits in 1997.

The rise of online investing platforms and a broad selection of funds has made international investment more accessible than ever. With many high-growth tech companies establishing roots in the US and a lack of similar companies in the UK, it is evident why UK investors have been lured to American markets.

While a general reduction in home bias can be beneficial—diversifying investments across various countries and assets to weather market fluctuations and minimize risk is often seen as the best strategy—there’s nothing inherently wrong with trusting your home bias when seeking out new investment opportunities. As the old adage goes, it’s wise to stick with what you know.