Investing locally isn’t just about being community-minded… 20 years ago the NBER found that local investment outperformed non-local ones by 25.0% (with fixed effects over the 5-year horizon)1. Today, we are more connected and have more options, but local investments stay a valuable and overlooked wealth-building strategy. Do you want to miss out and regret it 20 years later?
In this post, I’m going to explore 5 aspects of research that have been in the blindspot when it comes to financial leverage as an investor.
Before we get started, what does it mean to invest locally? Well it depends on where you are as an investor (both physically and financially). Look at the businesses in your geographical proximity, whether small, medium, or still in a garage. Now if you’re an investor in the hustle and bustle of huge metro cities like New York, London, San Francisco, or São Paolo, look at localities in less financially central areas, perhaps ones you still have (or once had) ties to.
1. Local = Agile
When you invest locally, you help your community grow. However, like I said before, we want to dive into what this means for the investor. It means you’re spotting trends, risks, and opportunities before any external investor can, so you can move faster, and make more strategic investment decisions. In fact, information-demand research from Cornell University based on SEC data discovers that “investors acquire approximately 20% more financial information for their local investments.”2 But more than quantity, local investments indicate quality, as firms with the highest levels of local ownership often better predict future earnings, with returns up to 4.6% higher than companies with mostly non-local shareholders3. Essentially, the numbers prove that you can capture upside that non-local competitors will surely miss.
2. Be Exclusive
This one is best explained with an example, and allows me to illustrate the scale of opportunities you could be missing. Let’s say there's a small business in your area, and let’s say you live in San Bernardino, California. There's a little barbecue shop run by two brothers. You don’t consider it a serious investment so, sure, you’ve gone to eat there a few times, but it’s nothing big. In about two decades there would be 1000 stores, the once stand-alone restaurant would be franchised, and bought for USD$2.7M (USD$29M today). That’s the story of McDonald’s4. The U.S. Census Bureau tracks the number of new business applications in each state every month and from Jan to Feb 2025 alone, there were 434,144 applications, a 7.8% growth since the previous month5. Wyoming, USA had an approx. 21% increase in business applications, Nigeria has had a 25% growth in new business registrations6, and India has seen an increase in 15% in the startup space7, I’m not saying every little cafe or restaurant in your neighbourhood is going to become a huge franchised corporation with over 30,000 stores, but there might be an opportunity just like this one you’re missing, one you have exclusive access to and knowledge of right now.
3. Not too TAXing
Taxes are a big part of finance. Simply put, it’s important because it determines a company’s profitability, cash-flow, and overall financial position. With local investing, governments often provide tax breaks, deductions, or credits (if there is an aspect of historic or environmental preservation) incentivizing local investors (meaning there aren’t enough investors looking into it yet…) As of 2022, the OECD found that 87% of economies surveyed offer at least one tax exemption or financial incentive for local and strategic sector investment8. And the IZA has found that such targeted investment tax credits increase a firm’s capital stock by 14.5%, employment by 10.3%, and domestic sales by 9.6%, compared to businesses without such incentives9. So building on the last two points, not only is the opportunity itself attractive, but you would be getting a sweeter deal on it than someone who isn’t local.
4. Relationships are stronger than you think (financially speaking)
This point explains why banks, especially the prominent bulge-bracket and boutique firms, are so insistent on being “client-centric”. It’s not just the idea of serving the client to get them the financial growth they want, it’s about building a relationship so that both the clients AND the banks succeed. The ACCA has even published reports on how many firms have been creating strong relationships between various sectors and their finance functions so that information can be enhanced and diversified10. Numbers alone can’t do it, you need to have that one-to-one relationship with your local businesses, to allow a continuous trade of effective information. When we zoom in 10x, it’s clear that investing when there is a local-relationship results in fewer defaults and a higher drive for success.
5. Multiply, multiply, multiply.
It’s logical that focusing on one local investment can catalyze a ripple effect, benefitting other businesses in the area, driving up asset prices and recurring income. But this has been tested in the Neighbourhood in Bloom project, which demonstrated how community-focused investment significantly boosted prices in the area initially by 50%, with continued 9.6% annual increases thereafter11. Property prices in the surrounding area even went up! Investment at an early stage can get you the return multiple you’re looking for, and maybe even exceed that.
So there you have it. If you’re looking to be agile as an investor, gain exclusive opportunities early on, reap the tax benefits, gain unique insights from business relationships, and see that growth multiply locally (and in your portfolio), local investments could be your next method of creating wealth.
Local Does as Local Is: Information Content of the Geography of Individual Investors’ Common Stock Investments Zoran Ivkovich and Scott Weisbenner NBER Working Paper No. 9685 May 2003 JEL No. G11, G14. https://www.nber.org/papers/w9685
Travis A. Dyer, The demand for public information by local and nonlocal investors: Evidence from investor-level data, Journal of Accounting and Economics, Volume 72, Issue 1, 2021.101417, ISSN 0165-4101, https://doi.org/10.1016/j.jacceco.2021.101417.
Hyman, Michael, (2016). "Local Investment and the Relationship Between Prices and Earnings" . Dissertations - ALL. 638. https://surface.syr.edu/cgi/viewcontent.cgi?article=1638&context=etd
McDonald’s History. https://corporate.mcdonalds.com/corpmcd/our-company/who-we-are/our-history.html
Business Formation Statistics by State. (2025, March 12). U.S. Census Bureau. https://www.census.gov/library/visualizations/interactive/bfs-by-state.html
Kayode, O. (2025, April 23). Startup Act in Nigeria: Two Years on. O. Kayode & Co. https://www.okayode.com/2025/04/23/nigerias-startup-act-two-years/
Indian Startup Ecosystem. (2025, July 16). Startup India. Retrieved July 22, 2025, from https://www.startupindia.gov.in/content/sih/en/international/go-to-market-guide/indian-startup-ecosystem.html
OECD Investment Tax Incentives Database 2022 update brochure. OECD. https://www.oecd.org/content/dam/oecd/en/topics/policy-issues/investment/oecd-investment-tax-incentives-database-2022-update-brochure.pdf
Lerche, A. (n.d.). Investment Tax Credits and the Response of Firms. IZA - Institute of Labor Economics. DISCUSSION PAPER SERIES.
Lyon, J., & The Association of Chartered Certified Accountants (ACCA). Collaborative working: why relationships matter in finance. Accountants for Business.