Presentation: Questions and answers on global investing

To help you to prepare materials for clients, we’ve developed these slide selections on global investing. We know you’ll want to customize them and add elements specific to your client, so we’re providing a Word file to make that easier.

Enjoy, and we hope this offering enhances your client meetings.

SLIDE 1

On the fence about whether to invest globally?

Here are some things to think about.

SLIDE 2

Is home bias a good thing?

A lot of Canadians stick with home country stocks. It gives them comfort, but it can also limit their ability to diversify.

SLIDE 3

If home bias means 100% of your portfolio is in Canada, it’s probably a mistake. Your equity portfolio should be diversified with exposure to Canadian, global and emerging market stocks.

SLIDE 4

Are investors who show a strong home bias missing out?

SLIDE 5

It comes down to diversification and growth potential in a portfolio.

There’s a lack of diversification in the Canadian marketplace, given a smaller number of available equities and some industry concentration compared with other global markets.

SLIDE 6

We don’t have a lot of great technology and healthcare companies, and we lack diversification in our financial services businesses.

So we do have lots of good companies, but there are many great companies globally that you don’t get exposure to if you just invest in Canada.

SLIDE 7

Is investing in home companies that you know and have easy access to necessarily smart investing?

SLIDE 8

Sometimes it’s smart to invest in what you know, and keep it simple. An investor like Warren Buffett always says he really has to understand the business he’s investing in.

SLIDE 9

Still, investing in mutual funds or ETFs in global markets is very important.

That way, the benefit of diversification comes not only from individual companies, but also from access to the countries’ economies and broader businesses.

Minimize your risks through investing in diversified portfolios.

SLIDE 10

Can being concentrated in Canadian financials and resources be a big mistake?

SLIDE 11

It’s a question of diversification. People think everything’s going to be safe until the worst-case scenario hits.

SLIDE 12

Diversification can protect you from a worst-case scenario. Remember Nortel, which made up more than 30% of the index on which it listed in 2000. Investors thought it was only going up.

But over the next ten years it lost value to the point where it was eventually de-listed.

SLIDE 13

What are the main risks with looking beyond Canadian borders?

SLIDE 14

#1. Currency risk

Canadians understand currency moves all over the place. We’ve experienced volatile movements.

If you don’t understand the currencies you’re buying into, consider a currency hedge.

SLIDE 15

#2. Political risk.

If you’re investing in China, for instance, you have to worry about how the Chinese government may influence the value of the yuan.

SLIDE 16

#3. Tax

When you buy foreign investments, there is often withholding tax on dividends.

And you can lose a lot of the tax efficiency of income.

SLIDE 17

#4. Capital market integrity