How much exposure do your business and investments have to the big world around us? I was recently asked to talk to Canadian business women about global expansion of their companies. Before becoming a Financial Advisor, I was in the language business. I brought international students to Canada to learn English, attend summer camps, or spend a short or long time at a high school. Since I finished high school, I’ve always been active internationally, living in England and France, and recruiting students in Latin America, Asia and Europe.
If you are familiar with my advice, you will know that I recommend my clients do some of their investing outside of Canada. Canada is a small country in terms of population and market size. Because of our low population (we just attained 37,000,000), we are only 3% or 4% of the world market. That means there is another 97% of the world economy which we can only access outside of our borders.
Diversification in investments means not only geographically but also in terms of sectors: when you study the TSX Composite Index carefully, you’ll see that it is very heavily weighted to companies in the financial, energy and materials sectors. If you are looking for investments that also include consumer goods, information technology and healthcare, to name just a few, you’ll want to look at the USA, Europe and Asia.
You know that most of the big multinational companies tend to be headquartered in other countries. Mutual funds which focus on the US and/or on global markets give you the opportunity to grow your investments by owning small amounts of companies like Apple, Google, Chanel, Samsung, Toyota, etc. Mutual funds are useful for smaller investors because they give you an economical way to invest in these companies without converting Canadian dollars to other currencies and having many different accounts allowing you to purchase shares on foreign stock exchanges.
You can even be a small partner in assets such as bridges and real estate in countries across the globe by owning units in a mutual fund or ETF which invests in companies developing infrastructure in China, India and other markets.
Some of my favorite mutual funds for global investing are:
- Funds in the Black Creek family of mutual funds owned by CI Investments. Black Creek pursues an equity mandate with no restrictions on finding the best businesses in the world. I’ve heard the award-winning money managers speak on the research they do to select these businesses for their funds. Black Creek offers a global balanced fund, a global leaders fund which invests in equities from all countries, and an international equity fund that includes only companies from outside Canada and the US.
- The Dynamic Power funds have also historically offered excellent returns. Again, this award-winning manager and his team have that in-depth knowledge of the companies in which they invest and are constantly studying the underlying value and future prospects of each one to ensure they are good solid investments. With these funds you will likely have exposure to Hong Kong, China, Japan, South Korea, Brazil, Austria and Germany, as well as the US.
- You may have read previous newsletters of mine talking about NEI Environmental Leaders Fund. The Fund follows a socially responsible approach to investing, seeking to achieve sustainable returns over the longer term by investing globally in companies active in the growing resource optimization and environmental markets. As of the date of writing this newsletter, 40% of the companies held in the fund are from countries other than the US and Canada.
Are you also familiar with emerging economies which often tend to grow faster than our developed world? Investments in countries such as India, Brazil, Mexico, Vietnam, etc., are usually not correlated to investments in developed countries, meaning at times when our markets are down, these emerging markets may be going up. Another way to diversify your investments.
As a savvy investor, it is well worth your while to understand where Canada and other countries fit into the global economy and how important it may be to hold investments outside of our native land. What percentage of your investments should be abroad depends on your situation and your risk profile; however, I will always maintain it is risky to have 100% of your investments in Canada.
Contact me for a conversation about this and any other matters related to your investments, insurance and your financial situation.
It’s just good advice.
P.S. Happy Canada Day!