Explain home bias and choose, on purpose, how much Singapore exposure you want.
Open the factsheet of the world index you use and find Singapore's weight. It will be well under 1%, but the figure changes, so use the current one. Then work out what share of your own shares is in the STI or other Singapore companies. If your share is far bigger than the factsheet figure, you have home bias, as almost every investor in the world does.
Home bias is holding far more of your home market than its share of world markets. A Japanese investor holding mostly Japanese shares, an Australian holding mostly Australian shares and a Singaporean whose portfolio is mostly STI are all doing the same thing.
The benchmark for judging it is the market weight. Lesson 2.1 described how a world index is weighted by market value, so each country's share reflects the value of its listed companies. Singapore's share is small. Even a modest STI holding, say 15% of your shares (an example figure), is many times Singapore's weight. Holding more of something than its market weight is an overweight, whether or not you meant it.
Grace, the course's example investor, picked up her home bias from her father, who has held Singapore bank shares for 30 years and never sold. When she started investing, he told her to stick to what she knows. Her first fund was an STI ETF. It felt safe because she could name the local companies, the dividends came in Singapore dollars and she could follow prices in the morning paper. When she cut her STI weight in Lesson 2.4, "Map indexes onto your allocation", part of her felt disloyal.
Lesson 2.2, "World, US, emerging or Singapore: what each index gives you", showed that the STI holds 30 companies and leans heavily towards banks and property. A large STI holding is a concentrated bet on a few sectors in one small economy, which is narrower than a general bet on Singapore. Concentration is not the same as danger, and Singapore's large companies may do well. But a concentrated holding has fewer ways to recover when its main sectors have a bad decade. A world fund spreads the same money across thousands of companies in dozens of countries and every sector.
Most people miss that a portfolio is not the only place their wealth sits. For most people taking this course, a large share of what they own is already tied to Singapore:
Your job is in Singapore, and future salary is the biggest asset you have in your twenties and thirties. CPF savings are Singapore dollar balances held by the CPF Board. Equity in an HDB flat or condominium rises and falls with the Singapore property market. Cash is held in Singapore dollars at Singapore banks.
In a bad decade for Singapore, with banks struggling, property prices falling and hiring slowing, a large STI holding would fall in the same years that your home value, job security and possibly bonuses were under pressure. A world fund would be little affected. This overlap is the strongest argument against a big home overweight, and it is about your own situation rather than a general rule about markets.
Grace did the sum with made-up figures: CPF balances of S$90,000, her share of the flat's equity at S$150,000, cash of S$25,000, an STI fund of S$12,000, a Singapore government bond fund of S$20,000 and a world fund of S$68,000. The world fund's Singapore slice is a made-up 0.3%, or about S$200. Her total is S$365,000. Her Singapore-linked assets are S$90,000 + S$150,000 + S$25,000 + S$12,000 + S$20,000 + about S$200, which comes to about S$297,000, or about 81% of S$365,000 before counting her salary.
The first reason people give is familiarity. You know the companies and read about them, so owning them feels less like a leap into the unknown. Familiarity is comfortable but does not lower risk, and a bank is not a safer investment because you use its app.
The second is dividends. Many STI companies pay regular dividends, which appeal to people who like seeing cash arrive. Lesson 4.2, "Tax, costs and the behaviour each one encourages", covers how that preference can work for or against you.
The third, avoiding currency risk, is the strongest of the three. Singapore shares are priced in Singapore dollars, so their returns arrive without a currency layer. Lesson 5.2 shows what currency moves do to foreign holdings, and Lesson 5.3 covers when hedging helps.
None of these reasons makes a home overweight wrong. They make it a choice with a price, which you can pay on purpose. Grace decided some Singapore exposure in her shares is fine. Her STI weight is 15% of her shares (S$12,000 of S$80,000), and she concluded that 15% on top of an 81% Singapore-linked balance sheet is enough, so she will not raise it.
Compare your STI or Singapore share holding with the factsheet weight you found. List your Singapore-linked assets outside the portfolio: CPF balances, property equity and SGD cash. Add the Singapore slice of any world fund, which is its percentage times the fund value. Total the Singapore-linked assets and divide by everything you own, remembering that your salary is extra and not included. Weigh familiarity, dividends and currency risk honestly, then set a deliberate limit on your home weight.
Before you set that limit, you need the same picture Grace drew. Gather your CPF statement, an estimate of your property equity and your account balances, and the total will tell you more than any rule of thumb.
List every asset you own that is tied to Singapore, including your property equity and CPF, add them up, and write down what share of your wealth that is.
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