CANADIANS ARE INTERNATIONAL INVESTORS
Canada’s stock market is about 3% of global markets and does not offer adequate diversification and is heavily dependent upon strong markets for our natural resources. A prudent investor must seek the diversity and opportunity offered by foreign markets.
The moment one invests outside of Canada, foreign exchange risk is introduced so you have to be prepared to either accept the currency risk or hedge it away. Our solution is to consult with experts in the field and adopt a position which neutralizes a good percentage of the currency risk. We do not totally neutralize foreign currency exposure because it is impossible to be 100% certain of the direction of currency adjustments.
Non-North American diversification is achieved in several ways. We purchase American Depository Receipts (ADR’s) and by the careful selection of Exchange Traded Funds selected on the basis of the exposure they provide to a broad market, a specific country, or industry sector. Investing in larger corporations which derive a significant portion of their earnings from foreign countries is also effective.