In the thirteen months from March 2016 through March 2017, investors around the globe added to U.S. ETFs every single month. Europe, on the other hand did, not see the same level of investor appreciation. The global investor asked for their money back in eight out of those thirteen months.
The home-country bias exists all around the globe, but even the strongest cognitive biases can succumb to years and years of underperformance. MSCI Europe (in EUR) is up 9% a year since 2010, not bad at all, but the S&P 500 (in EUR) is up 18% a year over the same time. European investors have done nearly twice as well outside of their borders, so money did what it does, it flowed to where it was multiplied. Since 2010, European investors added $69 billion to European stocks, not much more than the $59 billion they added to U.S. stocks.
An interesting nugget in this treasure trove of data that I received from iShares is how investors have responded to up and down markets. U.S. investors fled stocks in 50% of the months that the S&P 500 was down (14/28) and poured money in 92% of the months when it was positive (53/59). So you see it doesn’t matter whether you wrap stocks in an traditional index ETF or an actively managed mutual fund, and it doesn’t matter whether the fund family charges 0.2% or 1.2%, there is a group of investors whose decision making will never improve as fast as the financial technology around them.
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If you’re interested in reading more about this, I wrote about why U.S. investors should consider easing up on their home country bias for Enterprising Investor.
