The now-rock bottom value of the loonie has advisors cautioning clients against the quite-understandable home country bias – a phenomenon actually paying off with the currency slide.
“I think that inclusive or exclusive of the dollar, (investors) are always leaning towards Canadian-based investments,” says Mike Gomes of Ironshield Financial Planning. “Canada represents such a small portion of global investments out there. I think (investors) will branch out.”
That may be hopeful thinking, though.
The Canadian dollar dropped to 91.5 cents U.S. on Friday, representing a half-cent drop. As many would expect, the news
sent day traders and Canada’s financial sector into a tailspin.
But Canadian investors were largely undeterred by this, and are, in fact, laughing all the way to the bank as a coming spike in the value of stocks heavily dependent on exports to drive performance. Those potential gains are likely to make it harder for advisors to convince clients to look outside Canada for opportunities.
Staying local works for investors because “it’s what they’re comfortable with,” says Gomes. “They’re here and they know what’s going on in the country.”
That being said, Gomes believes that Canadians should definitely consider getting outside of their comfort zone once in a while, as Canada is just the tip of the iceberg when it comes to investing.