New research from global index provider FTSE Russell suggests that Canadian investors may eat too much of their own cooking, and those with a strong home bias in equity investing can improve their diversification by increasing their exposure to international equities. The research includes a study of various hypothetical combined Canadian and international equity portfolios, as represented by FTSE Russell indexes, illustrating the potential risk and return benefits of adding more international equities to a Canadian equity portfolio.
The advantage of a more diversified equity investment palate
FTSE Canada All Cap Domestic & Global All Cap ex-Canada Index Blended Returns, 2005-2020
Mark Barnes, head of Americas investment research, FTSE Russell:
“The Canadian equity market is less diversified as compared to other global equity markets, which can handicap investors with a Canadian equity bias from the start. Our research suggests that pursuing a mix of Canada and non-Canadian equities over time within a more diversified global portfolio can deliver advantages to the end investor.”
Scott Johnston, head of product, Vanguard Investments Canada, Inc.:
“At Vanguard, we are driven above all else by giving people the best chance for investment success. Our investment strategy research consistently shows us that the diversification benefits of combining local with international equities can improve investment outcomes for Canadian investors. This helps achieve balance in a portfolio, one of our four anchor investment principles (together with goals, cost and discipline).”
Read the FTSE Russell Insight paper, “Too much of a good thing?”
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