3 Top Canadian Investments to Diversify Internationally

Fairfax India Holdings (TSX:FIH.U) is one of three great Canadian investments to help investors diversify internationally amid COVID-19 pressures.

| More on:
globe with a mask and text coronavirus

Image source: Getty Images

International diversification is overlooked by many beginner investors who may have a bit of home-country bias. Undoubtedly, by neglecting high-growth international markets, one stands to miss out on a lot of growth, especially younger investors who are better able to cope with higher levels of volatility that come with international and emerging markets.

Indeed, staying in Canadian stocks has delivered sub-par results over the past decade. The S&P 500 has clobbered the TSX Index, and the tech-heavy Nasdaq 100 has put the Canadian index to shame. Canadians don’t need to settle for sub-optimal results in Canadian securities. In fact, it’s not recommended to have all of one’s assets in Canadian stocks.

Why? The TSX is overweight energy, materials, and financials and underweight technology and consumer staples. Undoubtedly, the TSX isn’t diversified from a sector standpoint, inspiring the need for Canadians to expand their investment boundaries past Canada’s borders.

Indeed, many Canadians hold U.S. equities to get the “essential nutrients” lacking on the TSX. Most notably, tech and staples have been go-tos for Canadian investors. With valuations at the higher end, though, Canadians seeking value may wish to expand their boundaries further, perhaps into emerging markets, which are now discounted following recent damage done by the COVID-19 pandemic’s impact.

International diversification could be a brilliant idea right about now

Undoubtedly, many international markets have been under considerable pressure over the past year and a half. For Canadians who’ve been putting off international diversification, now is as good a time as any to do some buying. With a properly diversified portfolio across sectors and geographies, one can navigate these rough markets that much better amid volatility.

Many investors are likely fully aware of the risks of having a portfolio that’s not diversified across sectors. But many may not have given much thought to a portfolio that’s not diversified at the international level. Sure, one can do well just in Canadian and U.S. securities.

Still, in the era of COVID-19, where outbreaks are localized at any given time, I think broadening one’s exposure across countries is a strategy that could really pay off.

Two great international TSX plays

In this piece, we’ll have a look at two TSX-traded ways to gain international exposure on the cheap. Such names don’t require one to sign up to trade stocks on foreign exchanges and are magnificent ways to diversify one’s portfolio further.

Enter Fairfax India Holdings (TSX:FIH.U), BMO China Equity ETF, and European-focused high-yield property play Inovalis REIT. Each TSX-traded play (one stock, ETF, and REIT) are a great (and cheap) way to expose one’s portfolio to the Indian, Chinese, and European markets, respectively.

The ZCH is a terrific contrarian option for investors looking to load up on battered Chinese tech stocks following Beijing’s recent crackdown. In a prior piece, I outlined why the ETF was a compelling option for value-seeking Canadians while the ETF shed almost half its value. Inovalis plays on French and German office properties and is a great income option for those seeking a juicy 8.4% yield alongside exposure to Europe.

Finally, Fairfax India is a wonderful holding company managed by the legendary Prem Watsa, a man known to Canadians as Canada’s Warren Buffett. The Indian market has steadily been climbing back over the past year, yet shares remain ridiculously cheap amid delta variant concerns.

Bottom line

There you have it: three simple ways to internationally diversify one’s portfolio. Each name has been under pressure and could prove to be of great value as the world heals from the pandemic.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends FAIRFAX INDIA HOLDINGS CORPORATION USD.

More on Investing

Meeting handshake
Bank Stocks

Should You Buy Bank of Montreal Stock Now?

Bank of Montreal is making a big acquisition. Is BMO stock an attractive buy?

Read more »

Dividend Stocks

If I Could Only Buy 1 Stock Before 2023, This Would be it!

If you could buy 1 stock before 2023, what would it be? Here’s the stock I’m considering, and I think…

Read more »

Aircraft wing plane

Bombardier Stock Rose 15% in November: Is it a Buy Today?

Bombardier, Inc. (TSX:BBD.B) stock surged in the month of November. I’m looking to ride the wave going into December 2022.

Read more »


TD Stock Rose 4.6% in November: Is it a Buy Today?

TD Bank (TSX:TD) is a rock-solid stock for 2023.

Read more »

potted green plant grows up in arrow shape

2 Growth Stocks Down 25% to 75% I’d Buy Today

Growth stocks like WELL Health Technologies (TSX:WELL) are undervalued.

Read more »

Beautiful holiday decorated background with christmas gift boxes ,fir. christmas holiday concept
Dividend Stocks

3 Dividend Stocks to Help Offset Holiday Spending

The holidays are here, and so is the seasonal spending. Offset some of those costs by putting your investment cash…

Read more »

A bull and bear face off.
Stocks for Beginners

3 Stocks to Add During a Market Downturn

There are plenty of options to add during a market downturn. Here are several to considering buying today and holding…

Read more »

smiling couple at home with christmas tree
Tech Stocks

Holiday Bonus? You Could Double it With This TSX Stock

GSY stock gives investors an incredibly likely chance of doubling their holiday bonus in just over a year through a…

Read more »