Don't Keep All Your Money at Home
By David Futrelle

(MONEY Magazine) – If you love America, does that mean you have to love American stocks? According to researchers at the University of Michigan, folks in states that score high on a patriotism poll--such as Arizona and Kansas--invest more heavily in domestic stocks than those living in less, um, rah-rah places like Massachusetts.

This is a logical extension of what economists call "home bias." We all have a habit of cozying up to what we know and love--whether that means investing only in the U.S. or stuffing your 401(k) with company shares.

Sure, familiar names may feel safer. But according to Merrill Lynch, from 1971 to 2003 a portfolio with 20% in foreign stocks would have matched an all-American one--and with less volatility along the way. Remember, when the U.S. economy is in trouble, you may find yourself worried about your job and your portfolio at the same time. That's when it would be good to have some assets from beyond your backyard. --DAVID FUTRELLE