A Global Perspective: Where Does Canada Stand?

We may sometimes forget that the Canadian equity markets are small. Just how small? Canada’s equity markets represent less than 3 percent of the world’s total equity market (by market capitalization) and we rank as the 6th largest in the world.1 The largest, our neighbour to the south — the United States — represents around 42 percent of the worldwide equity markets.

When it comes to investing, in the past Canadians often had a home bias. Remember that until 2005, the federal government restricted registered pension plans such as RRSPs from investing more than 30 percent of their portfolio in assets outside of Canada. And, the dividend tax credit on Canadian dividends held outside of registered plans also acted as an incentive to keep money in Canada.

Investors Benefit from Global Exposure

Many investors benefit from exposure beyond Canada. While it is never possible to predict which market will be a top performer in any given year, a well-diversified portfolio may include looking across different geographies.

In today’s world of globalization, international exposure can also be achieved within Canadian markets. Some Canadian companies have multi-national businesses that operate in different global markets, and certain funds listed on Canadian exchanges invest internationally.

1 When comparing total market capitalization of equity markets by country of origin.