Do Canadian Investors Need Global Bonds?

A Canadian investor might view a global bond allocation as a kind of insurance against a national economic downturn—a housing market decline, a fall in natural resources prices, or some unforeseen shock

Dan Lefkovitz 2 September, 2021 | 1:15AM
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Diversification Suitcase

When it comes to equities, it’s not hard to make the case for global diversification to Canadian investors. Canadian stocks represent just 3% of global market capitalization. The market is heavy on the big banks and natural resources companies and light on healthcare and technology (beyond Shopify). Canadian equities have appreciated by less than half the level of the U.S. market over the past 10 years.  

What about bonds? Investors unhappy with the current 1.5% yield to maturity on the Morningstar Canada Core Bond Index could be forgiven for looking abroad for bigger income streams. Emerging markets bonds offer far higher yields. But that boost comes with much more risk.

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Dan Lefkovitz

Dan Lefkovitz  Dan Lefkovitz is a strategist for Morningstar's Indexes group.

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