Canada is one of the wealthiest nations in the world, and one of the most desirable investment destinations for natives and foreigners alike. The Toronto Stock Exchange (TSX) enjoys its status as the eleventh largest stock exchange in the world, which gives Canadian investors plenty of great domestic stocks to choose from.
If you’re new to investing, or you’re just looking for lucrative stock picks, Canada’s domestic stocks are a great place to start. Below we’ll break down the benefits of investing in Canada, as well as some domestic stocks you might want to add to your portfolio.
What are Canadian domestic stocks?
Domestic stocks are companies that are truly “made in Canada.” They trade on our exchanges, such as the TSX, they’re typically headquartered in Canada, and you’ll always see their share price in Canadian dollars. Domestic stocks are often contrasted with international stocks, which, as you can guess, are companies of non-Canadian origin.
You can find domestic stocks through any of Canada’s top online brokerages, though if you want to buy international stocks as well, you might have to open a “global account.”
Many of Canada’s domestic stocks come from the energy, financials, and materials market sectors, as those are the largest in the country. That said, in recent years, Canada’s tech sector has grown immensely, and we do have a fair share of retail stocks, as well.
What are some domestic stocks to invest in?
When it comes to domestic stocks, you have plenty of great options to choose from. Here are just five Canadian domestic stocks you may want to consider adding to your investment portfolio.
Shopify (TSX:SHOP) is a Canadian tech stock that has experienced explosive growth even since the onslaught of the COVID-19 pandemic. In fact, in 2020, Shopify posted a record revenue growth of 86% YoY, which helped the stock post a gain of 178.4% in that year alone.
Even though Shopify has slowed slightly due to a tech-correction in the second half of 2021, it’s still a lucrative stock to buy. Many retailers across the country (indeed the world) are still shifting physical stores to an e-commerce platform, which means Shopify hasn’t reached its peak yet.
Enbridge (TSX:ENB) continues to be one of Canada’s most reliable domestic stocks. The energy company has a massive pipeline network, which transports one-quarter of all crude oil in North America. In addition to being a safe stock, Enbridge also has a hefty dividend payout, which it has increased each year for the last twenty-five years.
Dye & Durham
Dye & Durham (TSX:DND) gives business professionals access to public records and government registry data. In recent years, Dye & Durham has built an impressively large customer base, due in part to the 19 acquisitions it has made since 2013. Riding on a strong demand for its products and services, Dye & Durham is definitely a domestic stock you don’t want to ignore.
Lightspeed POS (TSX:LSPD) is a Canadian growth stock that specializes in point-of-sale and e-commerce software, specifically to businesses in the retail and restaurant sector. Though it’s not as big as Shopify, Lightspeed POS has plenty of room to grow, especially if it can manage to expand outside of Canada.
Docebo (TSX:DCBO) helps companies train employees from a distance. It’s client base is growing rapidly—Amazon and Walmart are two of its biggest customers—and though its stock has been on a rocky ride since 2021, it’s still a strong company with a solid customer base that’s poised to grow even more.
Other domestic stocks you might want to consider include:
- TC Energy Corp
- Suncor Energy Inc
- Brookfield Renewable Partners
- Royal Bank of Canada
- Canadian National Railway
- Constellation Software
- Bank of Montreal
- Thomson Reuters
Why invest in domestic stocks?
For one, domestic stocks are typically easier to understand than international ones. This is especially true if we compare Canadian stocks to stocks in countries where the native language isn’t English. It’s already exhausting enough reading financial records in English, let alone in a language that’s completely different from our own (such as Russian, Portuguese, or Chinese). Even for countries whose mother tongue is English, such as the US or UK, certain tax rules could prove cumbersome to navigate, especially when you sell for capital gains.
With domestic stocks, you also don’t have to worry about losing money when you exchange Canadian dollars for another currency, or what’s called currency risks. Basically, an investor could lose money on an investment if currency exchange rates become unfavorable to you, even if the investment itself is doing well.
Finally you can find almost all Canadian domestic stocks through a Canadian brokerage. Though you could find international stocks through brokerages, too, it could be more expensive, especially if the broker charges higher trading fees for foreign transactions.
Should you invest in international stocks, too?
At a certain point, you’ll probably want to add international stocks to your domestic ones. In fact, considering that the Canadian market is only about 3% to 4% of the total world market, you might achieve greater diversification by buying shares in international companies.
Some experts recommend you dedicate a maximum of 20% of your portfolio to international stocks with the other 80% invested in domestic stocks. While portfolio balance is ultimately your decision, you don’t want to overextend yourself, especially if you’re investing in numerous foreign markets at once.
But don’t rush it. While, true, you can diversify with international stocks, you can achieve diversification with Canadian domestic stocks, too. Start with Canadian companies you’re familiar with, then you can try your hand at foreign stocks.
Starting investing in Canadian domestic stocks today!
If you’re new to investing, Canadian domestic stocks can offer you an excellent opportunity to capitalize on growth, not to mention help you achieve your long-term financial goals, like saving for retirement or your childrens’ college.
To get started, you can buy domestic stocks through any one of Canada’s online brokerages. You can also buy shares in an ETF or index fund that tracks the Canadian economy, which can also help you diversify your holding if you don’t have a lot to invest.