Why go global?

Canada Life - Sep 01, 2020
Diversifying your portfolio is a common way to help protect yourself against a downturn in the market
Boy on air plane playing with a toy air plane

Have you thought about investing outside of Canada?

Diversifying your portfolio is a common way to help protect yourself against a downturn in the market. When you diversify, you spread your investments out across different sectors. But if you only invest in Canada, you’re vulnerable to at-home risk. You can combat that by investing globally. In other words, by not holding all your eggs in one basket.

How to diversify

Here are four ways to diversify your portfolio, each with their own benefits and drawbacks:

  • By sector – natural resources, energy, healthcare, industrial, technology
  • By market capitalization – small-, mid- or large-cap securities
  • By asset class – equities, bonds or cash
  • By country – gain exposure by investing internationally

How Canadians are investing

According to the Investor Economics Household Balance Sheet Report 2018, 90% of the average Canadian’s assets are invested solely in Canada. Sure, it’s great to support local and domestic business. And you may think that if your assets are invested in different sectors, asset classes and market capitalizations, you’re well protected. But if there’s a downturn in the Canadian market, the majority of your investments could take a hit.

Plus, the same report says that Canada makes up less than 3% of the world’s financial market. If you’re one of those people investing only at home, you’re missing out on 97% of the world’s investment opportunities.

Canada relies on two cyclical sectors – energy and financials – which can experience high volatility from year to year. To offset these peaks and valleys, it’s important to expose your portfolio(s) to sectors around the world. Here are some underrepresented sectors in Canada:

  • Healthcare
  • Information technology
  • Industrials
  • Real estate
  • Consumer discretionary
  • Consumer staples
  • Communications services
  • Utilities

And here are the top 10 public companies by market value in the world. Going global to diversify means seeking out and investing in opportunities around the world – and there are plenty of them. When you spread investments out across these different sectors and geographies, you can effectively diversify your portfolio.

I can help you understand how to diversify your investments – by sector, asset class, market capitalization and by geography – and find the opportunities to help you reach your financial goals.