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Malkiel: Be Careful of the Home-Country Bias

Investors are making mistakes by focusing on domestic-oriented names and not having enough foreign exposure, especially with emerging markets, says author and Princeton professor Burton Malkiel.

Christine Benz: I know that you think most investors would probably be better off buying an all-index portfolio and calling it a day. But are there any sectors or categories where you think one might reasonably investigate some sort of actively managed product? Small caps are sometimes held out there as a sector where you might use an active manager, or perhaps international. Are there any areas that seem somewhat more reasonable to you than others?

Burton Malkiel: I still tend to be a skeptic about the sectors of the market that supposedly are going to do better. And small cap does do better than large cap over certain periods, and certainly over history in the United States has done better [during certain periods]. Value has done a little better than growth over long periods of time.