Canadian investors should reduce their risk and diversify their portfolios by investing outside of this country, said Don Reed, president and CEO of Franklin Templeton Investments.
“‘This time is different’ are four costly words because history often repeats itself,” he said yesterday at the company’s annual Outlook and Opportunities Forum in Toronto. “The Canadian markets’ strong returns cannot go on forever.”
The S&P/TSX is up more than 80% in value since 2002 but three sectors have driven a lot of the gains: energy, materials and financial services. Today, they account for 75% of the value of the Toronto Stock Exchange.
“For many Canadians, it’s time to diversify,” said Reed. “Canadian markets have had a strong five-year run. But no trend goes on forever. Investors need to lock in profits at home, diversify globally and secure future growth.”
Investors have been diversifying outside of Canada for a number of years. According to the Pension Investment Association of Canada, the asset mix of plans of sponsor organizations devoted to Canadian equities dropped to 19.9% last year from 26.5% in 2001.
And the asset mix devoted to U.S., EAFE, emerging markets and global equities rose to 32% last year compared to 30.1% in 2001.
To comment on this story, email craig.sebastiano@rci.rogers.com.