Why foreign content and how much should you have?

Over the last 20 years, international markets have outperformed Canadian markets by almost 2% a year.  It makes sense to invest globally not only based on historical returns, but also because many economic sectors (eg. Healthcare) are not significantly represented in Canadian markets.  In addition, despite several good years recently, Canada only represents 3% of world stock markets.

However, investing globally is higher risk, partially due to currency fluctuations.  So the lowest risk blend of foreign to Canadian for the equity portion of your portfolio is 40%/60%, but for most clients, a 50%/50% split will provide the best risk/return tradeoff.

Minimizing risk and financial theory are fine.  But what are professional money managers doing?  Canadian Pension plans in fact have the majority of their equities outside of Canada.  This matter was reviewed in detail in a recent ScotiaMcLeod Exchange newsletter.

Similarly, we profiled the asset allocation of the Scotiabank pension plan in a recent newsletter article, and found that it is 39% Canadian equity and 37% foreign.

We would be pleased to review your foreign content (including the foreign holdings in your Canadian funds) in our comprehensive Asset Allocation review. Please contact mailto:spiessmcgladeteam@scotiamcleod.com for a review.