In today’s world of investing it may seem strange to keep emphasizing the need to have a global outlook, but as Kevin Greenard writes in the Times Colonist, there’s a reason why Canadians have often stayed at home when it comes to investing, and breaking out of that mould can take some time, and education.
Specifically, before 2005, Canadians were restricted to having no more than 30 percent of their registered accounts in foreign holdings. After 2005, all restrictions were dropped and Canadians were allowed to have 100 percent of such holdings in foreign countries. Yet, sometimes old habits are hard to break, but they are worth it, and Greenard uses the Canada Pension Plan (CPP) as an example.
If the Canadian government does it….
In 1999, 100 percent of the CPP’s assets were in Canada. In 2006, it was only 64 percent, and, in 2018, that number has gone all the way down to 15.1 percent. The greatest source of foreign investment for the CPP was in the United States, followed by Asia and Europe.
So, what should this tell you? It should tell you that, if one of the country’s most important portfolios, which invests for the benefit of Canadian pensioners, believes it’s necessary to invest outside of Canada in order to seek satisfactory returns, then maybe the rest of us should start thinking the same.
There are so many reasons why investors should think globally when seeking opportunities. For one, and it’s something we’ve stressed on these pages for some time, investing in different places is a form of diversification. For example, global factors impact emerging markets differently than they do developed markets, so investing in each helps to diversify and protect a portfolio, doesn’t it.
Diversification and more
Greenard provides other reasons why investing globally, especially for Canadians, is a good idea. For one thing, the list of good investment opportunities, such as good companies, is limited in Canada. Why not expand that list by looking elsewhere? Also, while Canada may be strong in certain sectors, such as resources, it may not be very strong in others. Seek those other sectors in other places.
Indeed, the list of reasons to expand your portfolio globally is far too long to list here, but sometimes it’s just a matter of breaking old habits and going beyond the familiar in order to achieve the kinds of returns that meet your investment objectives.
ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.
