Own the world

Of all the publicly traded equities -- in the entire world -- Canada represents less than three percent. Yet for many Canadian investors the rest of the world is underrepresented in their investment portfolios. To some extent it's a Pavlovian response to the days just over a decade ago when the Canadian government restricted foreign holdings to less than 30 percent of a registered retirement savings plan. To some extent it's a fear of the unknown.

And that fear of the unknown is somewhat justified. Most financials advisors say Canadian equities should far exceed their global weighting in an investment portfolio because they are tied to us personally by a common economy and a common currency. They are also names we're familiar with -- and that count for a lot.

Still, diversification is good and a geographically diversified portfolio can spread out risk and expose investors to opportunities they would never find at home.

There are several ways to stake your claim on the world. The simplest and most common path is through mutual funds. Fees are above average but investors have the advantage of professional management and sub-managers who have access to local expertise. There are regional funds such as emerging markets or Pacific Rim, or country specific funds.

Investors who want to save a few bucks and bypass professional managers can invest in global indices through exchange traded funds. Like mutual funds, ETFs track geographic regions, specific countries or the entire global or international market through established indices like MSCI Europe/Asia/Far East and MSCI World.

Another interesting way to get at global markets is through multinational corporations that are growing their revenue internationally. Let companies like Coca Cola, Campbell Soup, Nestle, Wal-Mart, General Electric and Colgate-Palmolive do the market research and take the risk, while you reap the rewards. There is a series of iShares ETFs that track the S&P 500 global indices. S&P includes companies that grow their revenue outside the United States and divides them by sector.

February is Your Money Month on BNN. Don’t miss an episode of BNN’s Portfolio Builder where our experts help you sort through your options for investing. The BNN Portfolio Builder brings you everything you need to know about RRSPs and TFSAs, as well as tips on sorting through mutual funds, ETFs, stocks and bonds.