$17.5 billion was pumped by Canadians into foreign securities in November last year, a significant jump from the $5.4 billion the previous month. Of this record amount, $7.4 billion poured into US shares, with a particular focus on tech giants and funds that track broad market indices, like the benchmark S&P 500. Another $4 billion was directed towards non-US foreign shares by Canadians in November.
Since the beginning of last year, there has been a steady increase in investment dollars flowing out of Canada, with a record high $82 billion spent on US securities during the first 11 months of 2021. This appears to have paid off, with the S&P 500 advancing 27 per cent last year, compared with the 22 per cent gain for Canada’s benchmark S&P/TSX Composite Index.
This trend toward foreign investments is seen by some experts as a positive sign for Canadian investment portfolios which are known to be tethered to a home bias. Investment savings are notoriously skewed toward publicly-traded equities in the country, despite the fact that they only account for less than three per cent of global equities. Of this three per cent, about two-thirds are directly attached to the financial and resource sector, which turned out to be devastating for investors when the energy sector tanked in 2020.
Experts point out that that sort of risk can be avoided through global diversification, while it also exposes the investment portfolio to a wide variety of opportunities in terms of geographic regions and sector across the remaining 97 per cent of the global equity market.
