Top 7 Reasons to Invest Beyond our Borders
Canadians have always been known for their high-risk-taking-culture — NOT. Making foreign investments becomes increasingly important in order to achieve financial success. Limiting yourselves to a domestic Canadian market will reduce many financial opportunities. Here are the Top 7 Reasons to make foreign investments:
1) Canada is a small market. Canada represents only 3.5% of global equities. Restricting yourselves to the S&P/TSX will prevent taking a bite of the world’s highest performing indexes.
2) The Canadian market is dominated by a few major sectors. Energy and financial companies represent 60% of the S&P/TSX Composite Index. Diversification?
3) Some industries are virtually absent from the S&P/TSX. Investors preferring exposure to pharmaceuticals, health care services, defence, and information technology may want to consider some international corporate names.
4) Diversification becomes easier internationally. (This one really sells itself)
5) Canadian markets are highly cyclical. Because the markets are heavily weighted on commodities, they are vulnerable to cyclical swings. We have already seen the effects on the markets from commodity price changes.
6) Emerging markets offer more opportunities and returns. High-risk = High-return = China, India, Japan?
7) Currency risk is in minimal. Appreciation of the Canadian dollar is probably at its peak. Economists believe its depreciation will begin in 2008. This makes the risk of exchange-rate volatility minimal, and in our favour.
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