I’m not sure if you’re aware, but while the markets are down in Canada, it really hasn’t been the case south of the border. In fact, the United States of America has been going through some incredible strength. Strength that could mean Canadian investors are missing out!
What’s been happening
The U.S. markets have experienced some of the best performance in decades. The Nasdaq continues to trade at 52-week highs, up 30% year to date for its best annual first half of the year in four decades. Furthermore, the S&P 500 has also seen strong performance, with the best monthly performance since October 2022. The Dow performed similarly, experiencing the best month since November of last year.
Positive economic data has also led to investor growth in the U.S. This included the Federal Reserve stating that it would skip June in terms of an interest rate hike, unlike here in Canada where we experience a hike of 25 basis points. While another could come down in July for the country, it’s still a positive situation in the south.
Should Canadians invest?
In short, absolutely! As the great Warren Buffett has stated, “Never bet against America.” The country has been around since 1776, and become the powerhouse that it is today because of its focus on American business. So while others might be looking to gold for protection, or tech companies for growth, it might just be a solid option to simply stick to the U.S. itself.
What’s more, Canadians are pretty bad when it comes to investing outside of Canada. Sure, it’s all well and good that we’re nationalistic and investing in local business. However, you also want to increase your bottom line. If you’re worried about being taxed, this would really only occur if you’re collecting capital gains. So U.S. stocks are usually excluded from being taxed, especially when using a Tax-Free Savings Account (TFSA).
Grab a bunch with one click
Now you’ve likely heard all the big names when it comes to the U.S., and honestly it can be pretty overwhelming. That’s why it’s perhaps a better option to again go back to Warren Buffett recommendations. In this case, he recommends buying a high-yield exchange-traded fund (ETF) with a focus on the S&P 500 Index, with low management expense ratios.
What’s more, there are plenty of Canadian companies doing this! For example, you can pick up the iShares Core S&P 500 Index ETF (TSX: XSP). This ETF focuses on long-term growth through trying to replicate the performance of the S&P 500. Shares are up 18% in the last year, and it offers a 1.22% dividend yield as well. Finally, it has an ultra-low management fee of 0.09%, as of writing.
This ETF then goes on to invest in the top 500 companies on the S&P 500, which includes top performers from Apple to NVIDIA and even Berkshire Hathaway. So you’re now getting all the best of the best, for a low cost.
So, yes, Canadians, please invest in the ongoing strength of the United States. I get we all want to be patriotic, especially after Canada Day. But it’s time to get a bit greedy, don’t you think?
