Skip to main content

If past returns were a reliable indicator of future returns, the investor asset mixes I’m seeing these days would make great sense.

One reader talked about having 70 per cent of a portfolio invested in Nasdaq 100 stocks. Another mentioned a portfolio of two mutual funds, a balanced fund with a one-third weighting and a U.S. index fund for the rest.

These portfolios remind me of how investors were loaded to the gunwales with Canadian stocks and funds leading up to the global financial crisis 10 years ago. Resource stocks were on fire back then, and the Canadian market had been a strong global performer. U.S. stocks lagged and you could barely register the level of interest in having U.S. exposure among Canadian investors.

Story continues below advertisement

Ten years later, the S&P 500 has turned in annualized total returns of 13.3 per cent in Canadian dollars (period ending July 31), while the S&P/TSX Composite Index averaged 5 per cent. In no way am I predicting that the Canadian market is about to pull ahead of the U.S. market. But it’s clear from long-term stock market history that outperformance is temporary. Keep a strong weighting of U.S. stocks, but don’t get cocky.

The MSCI World Index divides up the world as follows: 62 per cent in the United States, 35 per cent in markets outside North America and 3 per cent Canada. Global investing purists might be happy with a 3-per-cent Canada weighting, but most investors in this country will want a lot more than that. One thought is one-third evenly split between Canada, the United States and international stocks in the equity side of your portfolio. American true believers could take that up to 40 per cent, with another 30 per cent in Canadian and international.

The U.S. market is an awesome diversifier for the Canadian market, which is deficient in technology and health-care stocks. Tech has been a huge performer in recent years, but market leadership tends to change over time. A diversified portfolio will ensure you’re not overly penalized when the market shifts, and that you’re well placed to scoop up gains in whatever markets and sectors take the lead.

Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies