Home Bias Calculator

Almost every investor in every country holds too much of their own market, and New Zealanders hold the most extreme version of it, because the home market here is unusually small relative to the concentration people carry. A New Zealand investor with 30 percent of their portfolio in domestic shares is not tilting slightly towards home; they are holding hundreds of times what a globally weighted portfolio would hold. The percentage difference does not convey this, which is part of why the bias persists. Thirty points sounds like a preference. Six hundred times sounds like what it is. This page measures your position against the global benchmark and reports it as a multiple as well as a difference, treats Australia separately from New Zealand because so many local funds report the two as one category and thereby hide how small the domestic slice is, and then adds the part almost nobody counts. For most New Zealanders the family home is the largest asset by a wide margin, and it is entirely exposed to one small economy, one currency and one property market, alongside a job and a superannuation scheme tied to the same place. Including it usually changes the picture more than any decision about the share portfolio would. None of this argues that home bias is an error. There are real arguments for some of it, including imputation credits and the absence of currency risk, and this page lays them out. The question is whether the amount you hold is the amount you decided to hold.

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Percentage Points Hide The Scale

A 30% allocation against a 0.05% benchmark is a difference of 29.95 percentage points, which sounds like a preference. It is 600x the global weighting, which is what it actually is.

That gap between how the two framings feel is most of the reason home bias persists. Nobody would deliberately choose six hundred times a benchmark weight, and plenty of people are comfortable with thirty percent.

Worked Example: $100,000 With 30% In New Zealand

$30,000.00 in New Zealand shares and bonds, against the $50.00 a globally weighted portfolio would hold at a 0.05% benchmark. Overweight by $29,950.00.

$10,000.00 in Australian shares against a $1,500.00 benchmark weighting, overweight by $8,500.00 and 6.67x the benchmark. Australia is a genuinely larger market, so the same dollar tilt is a far smaller multiple.

The rest of the world gets $60,000.00 against $98,450.00, so it is underweight by $38,450.00 and held at 0.61x the global weighting.

Australasia Is Not One Market

Many New Zealand funds report a single Australasian allocation, which is where a lot of this hides. Combining the two makes the domestic slice invisible.

On the worked example the pair together are 40.00% against a combined 1.55% benchmark, which is 25.8x. Split apart, New Zealand alone is 600x and Australia is 6.67x.

Splitting them is the single most useful thing you can do with a factsheet, because it moves the New Zealand figure from a number that looks reasonable to one that demands a decision.

Then There Is The House

For most New Zealanders the portfolio is not the largest asset, and the home bias question is not really about shares at all.

Adding $250,000.00 of home equity to a $100,000.00 portfolio produces $350,000.00 of assets of which $280,000.00, or 80.00%, is tied to New Zealand.

That figure still understates it, because your income is tied to the same economy, your future New Zealand Superannuation entitlement is tied to the same government, and if you own a business it is almost certainly tied to the same customers.

The risk this creates is not that any one asset is bad. It is that they all move together. A difficult decade for New Zealand affects the job market, house prices and the portfolio at the same time, and that correlation is invisible when each is looked at on its own.

The Arguments For Some Of It

Home bias is a choice rather than an error, and three arguments for it are genuine.

Imputation credits. New Zealand companies attach credits for tax already paid, which reduces the tax a New Zealand investor pays on the dividend. Foreign shares carry no equivalent.

No currency risk. A domestic holding is worth what it is worth. An unhedged foreign holding moves with the exchange rate as well as the market, and our currency hedged vs unhedged calculator shows how large that effect is.

Simpler tax. Foreign shares held outside a PIE can bring the foreign investment fund rules into play once the threshold is crossed. Our FIF de minimis calculator covers where that line sits.

Those justify some home bias. Whether they justify hundreds of times the global weight is a different question, and the honest answer is that they justify a tilt rather than a concentration.

Fixing It Without Selling Anything

The cheapest correction is to direct new money rather than move old money, which avoids both transaction costs and any tax event on realised gains.

Check the KiwiSaver allocation first, because that is where most of the unrecognised exposure sits and switching within a scheme is usually free. Conservative and balanced funds carry large domestic weights and most members have never looked.

Our fund overlap calculator shows the combined position across everything you hold, and our portfolio rebalance calculator works out the amounts to move.

Related NZ Portfolio Calculators

• Fund Overlap Calculator: your combined allocation across every fund.
• One Fund vs Multi-Fund Calculator: what control over the weights costs.
• Currency Hedged vs Unhedged Calculator: the currency risk on foreign holdings.
• FIF De Minimis Calculator: where the foreign investment fund threshold sits.
• Portfolio Rebalance Calculator: the amounts to move.