Canada has a mature and stable economy and a well-regulated financial system. It’s no surprise that Canadian securities factor prominently in many investors’ portfolios.
There can be drawbacks, however, if you’re only focused on Canada. If you are, you may be missing out on global opportunities that add important portfolio diversification, particularly when you consider that Canada only represents about 4% of global markets. Canada’s markets are also dominated by the energy and financials sectors. As a result, your portfolio may also be vulnerable when Canadian equities and bonds underperform.
Choosing investments in several different geographic regions, including Canada, spreads the risk and lessens the impact of underperformance in any single region, while also broadening your horizons and opening you up to a whole world of strong investment opportunities.
Market leaders rotate
The following table compares the countries with the best- and worst-performing stocks over the last 15 years. While Canada’s performance has been strong at times, you can see how greater exposure to other countries allows you to take part in the strength of markets worldwide as they alternate market leadership positions.
Achieve a well-rounded portfolio, with an advisor’s help
Being a successful investor depends on well-rounded diversification. A financial advisor can help you achieve this, mainly by building a well-diversified portfolio that effectively covers both Canadian and international markets to help you meet your long-term financial objectives.