Why invest outside Canada?

A well-diversified portfolio will contain both Canadian and global investments:

• Although Canada ranks as the seventh largest stock market in the world, it accounts for only three percent of total capitalization and is heavily concentrated in three core sectors: financials, energy and materials.
• Global markets are not only much bigger than Canada, they also contain a much broader range of investment opportunities. While some 3,000 stocks trade in Canada, more than 40,000 trade in global markets.
• There is far greater access to stocks in sectors such as health care, technology, consumer goods and manufacturing outside Canada. In all these sectors, industry-leading companies are based outside Canada.
• Even in the financials, energy and materials sectors, where Canada is a world leader, there are eight times as many potential investment opportunities outside this country.
• A geographically diverse portfolio aids in risk reduction.

You already know the global economy

You probably know more than you think about the global economy because you live in it every day. The average Canadian could be touched by several global economic regions – all before lunchtime. (Move cursor over the photos below)

Spreading the wealth

Astute investors can share in the wealth of companies that are earning profits serving customers around the globe, be they consumer goods companies in the U.S., chocolate makers in Europe or car manufacturers in Asia. Going global gives investors access to more top sectors and strong companies, and a chance to benefit from the global economic recovery.

"The world is going beyond North America. In the long-run, the opportunities are outside of Canada. It's where wealth is being created,” says David Winters, manager of Renaissance Investments’ Global Markets Fund.

While there is a perception that investing globally is riskier, the historical risk/return chart shown below illustrates that owning a geographically diverse investment portfolio will, in fact, both reduce volatility and increase returns over time.

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It is also important to note that, in the long run, global equity markets outperform Canadian equities, as illustrated by the chart below.