Yahoo Finance OH CANADA! CANADIAN INVESTORS STILL HAVE HIGH LEVELS OF HOME BIAS IN THEIR PORTFOLIOS, BUT ARE INCREASING GLOBAL DIVERSIFICATION
Vanguard research shows that Canadians are putting too many eggs in one basket with 50% of domestic equity exposure, which is more than an 18X overweight to Canada
TORONTO, June 25, 2024 /CNW/ - A new Vanguard research report on Canadian investors' home bias, found that Canadians currently allocate 50% of their equity exposure to domestic companies, which is 18 times more than the percentage of Canadian assets in the global equity market (roughly 2.7%).
However, Canadian investors are moving slowly to add greater global diversification, with the percentage of home bias in Canada falling from 67% in 2012 to just over 50% currently. This shift is seen at a lesser extent in other developed markets, including Australia, Japan and the U.S.
"Canadians are showing greater appetite for global equities which is positive and follows a global investing trend to favour international markets," said Sal D'Angelo, Head of Product, Vanguard Investments Canada Inc. "However, the rate of overexposure to domestic securities is still relatively high. Lack of diversification in your portfolio can lead to sector concentration, greater volatility and less efficiency with your investments, all of which can contribute to higher risk."
Home bias is the tendency of investors to allocate a significant portion of their investment portfolio to domestic assets while underweighting international investments.
"Canadian investors have a long-standing belief and pride with investing close to home. This is a sound strategy if that exposure is moderate. Based on our research, we see a reasonable equity balance of around 30% home bias, in Canadian securities, and 70% invested in non-domestic markets," added D'Angelo.
In the paper, Vanguard research highlighted the following findings:
Portfolios overweighted in Canadian stocks can be more volatile.
Overexposure to the Canadian equity market can lead to less efficient portfolios with security and sector concentration risk.
Allocating too much of your investments to one country can also lead to greater portfolio volatility and a bumpier ride for investors.
For more information on this Home Bias study and research, please visit www.vanguard.ca
Vanguard's suite of Asset Allocation ETFs feature a portfolio mix of 70% international exposure and 30% allocation to Canada, along with access to a diversified universe of over 20,000 individual securities. This suite of ETFs has grown to over $13 billion (CAD) in assets since its initial launch in 2018.
About Vanguard
Canadians own CAD $103 billion in Vanguard assets, including Canadian and U.S.-domiciled ETFs and Canadian mutual funds. Vanguard Investments Canada Inc. manages CAD $70 billion in assets (as of April 30, 2024) with 37 Canadian ETFs and six mutual funds currently available. The Vanguard Group, Inc. is one of the world's largest investment management companies and a leading provider of company-sponsored retirement plan services. Vanguard manages USD $9.3 trillion (CAD $12.8 trillion) in global assets, including over USD $2.7 trillion (CAD $3.7 trillion) in global ETF assets (as of March 30, 2024). Vanguard has offices in the United States, Canada, Mexico, Europe and Australia. The firm offers 423 funds, including ETFs, to its more than 50 million investors worldwide.
Vanguard operates under a unique operating structure. Unlike firms that are publicly held or owned by a small group of individuals, The Vanguard Group, Inc. is owned by Vanguard's U.S.-domiciled funds and ETFs. Those funds, in turn, are owned by Vanguard clients. This unique mutual structure aligns Vanguard interests with those of its investors and drives the culture, philosophy, and policies throughout the Vanguard organization worldwide. As a result, Canadian investors benefit from Vanguard's stability and experience, low-cost investing, and client focus. For more information, please visit vanguard.ca.
SOURCE Vanguard Investments Canada Inc.
View original content: http://www.newswire.ca/en/releases/archive/June2024/25/c8181.html
