Superior Returns Await: Why Canadian Investors Should Add U.S. Stocks to Their Portfolios

Historically, the American stock market has outperformed our own. In this article, I’ll discuss why Canadians should add U.S. stocks to their portfolios.

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Historically, the American stock market has outperformed the Canadian market. To put this into numbers, the S&P/TSX has gained about 23% over the past five years. In comparison, America’s S&P500 has gained more than 61% over the same period. That suggests that the American stock market has outperformed Canada’s by nearly three times. Because of that, I think all Canadian investors should add U.S. stocks to their portfolios.

In this article, I will discuss two options that I think Canadians should consider.

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Image source: Getty Images

This is my favourite stock on the New York Stock Exchange

When talking about stocks that trade in the U.S., one company stands out the most, in my opinion. That would be Sea Limited (NYSE: SE). This is a Singapore-based company that trades in the United States. What attracts me to Sea Limited is the breadth of its business and the potential for immense growth in each of its different business segments.

For those that aren’t familiar, Sea Limited operates in three industries: esports, e-commerce, and digital banking. All three of those industries are poised for tremendous growth over the coming years. Of those three, Shopee, its e-commerce business appears to be the most promising. In 2022, Sea Limited reported US$12.4 billion in revenue. Of that, US$7.3 billion was attributed to Shopee’s business.

Over the past five years, Sea Limited stock has gained nearly 250%. I believe the company could continue to see tons of growth as the esports, e-commerce, and digital banking industries continue to grow. Operating in many countries across Asia and South America, Sea Limited is poised to see great success in the future.

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Buy this if you’re anxious about investing internationally

Of course, investing internationally may not be the easiest thing to do for some people. If that’s the case, then I think investing in an exchange-traded fund (ETF) would be a great option. For those that are unfamiliar, ETFs are essentially a basket of companies. The goal of these funds is to track an index, as opposed to mutual funds, which aim to beat the market.

If you were to invest in an ETF like Vanguard S&P500 Index ETF (TSX: VFV), then you would be exposing yourself to a large proportion of the American economy. This ETF includes many of the largest companies in the world, such as Microsoft, Amazon, Procter and Gamble, Visa, and many more.

Because this ETF tracks the S&P500, its performance has been very similar. As mentioned earlier, the S&P500 has gained just over 63% over the past five years. The Vanguard S&P500 Index, however, has gained 62.9% over the same period. If you’re interested in exposing your portfolio to American companies but aren’t sure where to start, then I think the Vanguard S&P500 Index would be a good idea.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Jed Lloren has positions in Microsoft, Sea Limited, and Vanguard S&P500 Index ETF. The Motley Fool recommends Amazon.com, Microsoft, Sea Limited, and Visa. The Motley Fool has a disclosure policy.

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