Article written by Jason Choy, InvestNow Senior Portfolio Manager – July 2026

For many Kiwis, buying a home is the biggest financial decision you’ll ever make. It’s also likely to be one of the largest financial exposures you’ll have to the New Zealand economy.

Think about it.

Your income is tied to the New Zealand economy. Your house is tied to the New Zealand property market. Your KiwiSaver contributions come from a New Zealand employer.

None of that is inherently a bad thing, and it’s certainly not to say you shouldn’t invest local. New Zealand has produced many successful companies and has historically delivered strong investment returns.

But it does raise an interesting question: could New Zealand already make up a larger share of your overall wealth than you realise?

The home bias trap

There’s a well-known phenomenon in investing called “home bias”.

It’s when investors tend to invest disproportionately in companies and assets from their own country. It’s not just a New Zealand tendency, but it tends to matter more in smaller countries like ours.

The entire New Zealand share market represents less than 0.1% of global equity markets by market capitalisation. If an investor invested strictly according to global market capitalisation, New Zealand would almost be a rounding error.

Yet many Kiwi investors have portfolio allocations to New Zealand that are significantly larger than New Zealand’s actual share of the global investment universe. For example, Melville Jessup Weaver’s recent June 2026 Investment Survey found that many of KiwiSaver’s largest diversified growth funds feature an average allocation of around 21% to New Zealand and Australian shares, with a further 8% allocated to New Zealand bonds.

And that comes on top of the already large exposure investors already have to the New Zealand economy through their jobs, homes and broader financial lives.

Why Kiwis have favoured New Zealand

There are good reasons why New Zealand has traditionally occupied a large place in Kiwi portfolios, beyond the notion of supporting local.

New Zealand shares come with tax advantages such as imputation credits, which prevent company profits from being taxed twice, together with the absence of a capital gains tax. These factors can improve after-tax outcomes for local investors.

While past performance is not a reliable indicator of future returns, the New Zealand market has also long-term returns. The NZX 50, representing the 50 largest listed companies in New Zealand, has generated a roughly 8% annualised total return each year over the past two decades, supported by a combination of capital growth and relatively strong dividend yields.

Although New Zealand shares have struggled to keep pace with global counterparts over the past five years, there’s nothing inherently wrong with investing in New Zealand from a technical or performance perspective.

In fact, new investors may be surprised to know that the New Zealand share market was one of the stronger performing developed share markets  during the 2010s, averaging an annual return of ~14% per year and outperforming both the S&P 500 and broader global share market indices over this decade.

The issue isn’t owning New Zealand assets in isolation. The issue is forgetting that many New Zealanders already own a substantial amount of New Zealand risk before they buy a single share.

Home bias quite literally starts at home

For many New Zealanders, the family home already dominates their household balance sheet.

According to Cotality, the median New Zealand dwelling is valued at $806,000. Stats NZ reports New Zealanders who own or partly own their dwelling have a median total net worth of $635,000.

This illustrates just how dominant property is in the balance sheets of many Kiwi households, even after accounting for mortgages.

Real estate is highly susceptible to the strength of the national economy, and is very much an illiquid asset.

Not to mention the significant number of Kiwis that also own rental properties or a holiday bach, further double dipping their exposure to the vulnerabilities of the New Zealand property market.

A potential risk arises when a large proportion to the vulnerabilities of a small economy tucked away in the corner of the world, let alone a single industry within this small economy such as New Zealand property.

A double-edged sword

Your ability to earn an income is also closely tied to the performance of the local economy.

If the New Zealand economy performs well, your job, your house and your investments may all benefit together.

But the reverse can also be true.

Recent years have provided a useful reminder of why diversification matters.

Different economies and markets can experience vastly different outcomes over the same period. In the three years to the end of June, the NZX 50 produced an average annual return of just 1.4%, compared with 11.7% for Europe, 19.0% for the United States, and 14.3% for emerging markets.

The fact other markets have outperformed New Zealand is not the concern in itself. The concern is that periods of economic weakness can affect multiple parts of a Kiwi household’s balance sheet at the same time.

Over roughly that same time period, average New Zealand property prices dropped nearly 15%, wage growth was labelled among , unemployment has risen from 3.3% to 5.3%, and business liquidations have hit record highs.

This illustrates one of the risks associated with having multiple financial exposures linked to the same economy.

When things are going well, that concentration can feel rewarding. But when conditions deteriorate, multiple parts of your wealth can move in the same direction simultaneously.

Ultimately, a well-diversified investment portfolio should complement and help protect against the risks of your wider balance sheet, not mirror it.

The world is (much) bigger than the NZX

There’s another reason diversification is particularly important for New Zealand investors.

Our market is so small.

While New Zealand contains many high-quality companies, it simply doesn’t offer the same breadth of opportunities that are available globally.

Entire industries that now dominate global markets, including artificial intelligence, semiconductors and major technology and innovation-led businesses have little to no representation on the NZX.

By contrast, the global share market contains thousands of companies operating across every major industry, geography and economic cycle.

Diversification isn’t just about reducing risk. It’s also about expanding opportunity.

What investment managers are doing

One of the more interesting developments in recent years has been the gradual shift by many fund managers towards greater global diversification.

Across the industry, portfolio construction has increasingly shifted towards offshore assets. Reserve Bank data shows the total proportion of overseas assets across all KiwiSaver schemes increased from 51.2% in 2021 to 60.8% in 2026.

It’s also part of a much longer-term trend. Ten years ago, offshore assets were actually the minority, making up just 44.8% of KiwiSaver portfolios.

While recent performance differences have undoubtedly contributed to the trend, it also reflects the broader range of investment opportunities available offshore and the practical reality that, as KiwiSaver assets continue to grow, global markets provide greater capacity and depth for investment.

Across a range of diversified investment managers, including within our own range of diversified – we’ve seen numerous strategic shifts toward greater global diversification and lower New Zealand concentration, particularly within equities.

The objective isn’t to eliminate New Zealand exposure altogether. Rather, it is to build portfolios that recognise the global opportunities available to investors while diversifying exposure across different economies, sectors and sources of growth, which helps reduce concentration risk.

A useful exercise

For Kiwi investors, one of the most valuable things to do is look at your entire balance sheet.

Not just your investments, but everything you own.

Ask yourself:

• How much of my wealth is tied to New Zealand property?
• How dependent is my income or business on the New Zealand economy?
• How much of my KiwiSaver and investment portfolio is invested locally?
• If the New Zealand economy experienced a prolonged downturn, what percentage of my wealth would be affected?

When you view it through that lens, you may be surprised by how much exposure you already have to New Zealand.

Diversification starts with awareness

None of this means investors should avoid New Zealand.

There are plenty of good financial reasons to invest locally, not to mention the emotional connection and familiarity of supporting businesses close to home.

The challenge is recognising that many New Zealanders already have substantial exposure to the local economy before they even build an investment portfolio.

Accessing global markets has largely never been easier or more affordable. Whether through KiwiSaver, managed funds or broad global index funds, investors can spread risk across thousands of companies and dozens of countries with a single investment.

That’s a powerful shift from previous generations. Investors have more options than ever before to diversify their exposure across different markets, sectors and economies.

Ultimately, diversification isn’t about turning your back on New Zealand.

It’s about recognising that many of us are already backing New Zealand through our homes, our jobs and our everyday lives.

When you stop and look at your entire balance sheet, you may find you’re already making a bigger bet on New Zealand than you realised.

And that’s why diversification matters more for Kiwi investors, not less.

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