The ABCs of Diversifying Away From SPY Stock for Canadians Investing in the U.S.

Are you interested in getting more involved in the American stock market? Here’s how you can diversify out of SPY stock!

For many Canadians, the TSX contains all of the stocks they need for their financial goals. I believe the TSX offers Canadians a wide variety of companies to choose from. Many of which would be excellent to hold in a portfolio. However, I also believe solely relying on the TSX could be a major mistake.

For instance, if the Canadian stock market were to ever experience a prolonged period of uncertainty, it could spell disaster for your portfolio. That’s why diversifying your portfolio and investing internationally could be so important to keep in mind.

One way that Canadians often diversify is by buying shares of the SPDR S&P 500 ETF Trust. As its name suggests, this exchange-traded fund tracks the performance of the S&P 500, which, in turn, tracks the performance of 500 large American companies. Although it may seem like a great idea to pin all of your American exposure to this well-diversified portfolio, it could hinder your potential growth.

That’s because returns generated by funds like SPY include underperforming companies. That’s why it may be better for investors to pick a handful of individual companies that they’re very bullish about in hopes of generating market-beating returns.

In this article, I’ll discuss two U.S. stocks that Canadians should consider buying today. By diversifying the American stocks you hold in your portfolio, you could be setting yourself up for greater success in the future.

If you’re interested in an American-listed tech company

Sea Limited (NYSE: SE) is the first stock that I think Canadians should consider buying today. For those who may be unfamiliar with this company, you should know that although it’s listed in the U.S., it’s actually a Singapore-based company. Sea Limited operates three distinct business segments: Garena, Shopee, and SeaMoney. These represent its entertainment, e-commerce, and digital banking services, respectively.

Of those three business segments, Shopee and SeaMoney should be focused on by investors. Shopee is important because it represents Sea Limited’s largest division. In its third-quarter (Q3) 2023 earnings presentation, Sea Limited reported that Shopee generated US$2.2 billion in revenue. That’s a very large chunk of the company’s total revenue of US$3.3 billion.

However, SeaMoney is important because it’s Sea Limited’s fastest-growing segment. With a 36.5% year-over-year increase in revenue, SeaMoney continues to impress.

One of the biggest consumer names in the world

With the large tech stock out of the way, investors should look to balance their portfolio out with a more conservative company. That’s where Procter and Gamble (NYSE: PG) comes in. This is one of the largest names in the consumer market. Procter and Gamble is the parent company behind many of the products you interact with on a daily basis. This includes Tide, Bounty, Tampax, Head and Shoulders, and many more. All considered, Procter and Gamble offers more than 30 different consumer products.

Over the long term, this has been a very reliable stock for investors. Over the past five years, Procter and Gamble stock has generated a return of about 60% before dividends are included. Speaking of which, the stock offers investors a dividend yield of about 2.5%. If you’re looking for a solid company that you’re very familiar with, then Procter and Gamble could be one to add to your portfolio.

Fool contributor Jed Lloren has positions in Sea Limited. The Motley Fool recommends Sea Limited. The Motley Fool has a disclosure policy.

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