Whether you’re a sports fan or not, you’ve likely hopped onto the Raptors bandwagon, especially after last weekend when the Raps advanced to the NBA finals for the first time, ever.
Game 1 of the NBA finals was last night and while my bedtime is typically around 9:30pm (11pm is a wild night), Mark and I stayed up to watch the 9pm tip off and get our first taste of a Canadian NBA championship. Though things got off to a pretty even start, it didn't take long for the Raptors to overtake the defending NBA champs (who were also coming off an impressive six-game winning streak). Toronto led by 10 at the end of the first half, even stretching their lead to 12 at one point, but the only score that really matters is the one at the final buzzer: the Raptors took home the first win of the NBA finals beating the Golden State Warriors 118–109.
What happened during the game and especially afterwards was magical in our city; popularly now known as the 6ix. Strangers were cheering, hugging and high-fiving one another. The talk of the office, elevator and streets today has been the Raptors. Our city and our country has never been prouder – a positively consistent characteristic of us ‘nice’ Canadians. We’re proud of our own and come together with passion to celebrate. And while this passion is exciting to see (especially when it comes to sports), it’s a passion I don’t like to see in your portfolios.
For one reason or another, many Canadians tend to have a concentrated home bias when it comes to their investment holdings. One reason, in non-registered accounts especially, is the dividend tax credit applied to income earned from qualifying Canadian corporations. A pretty good reason that I encourage and execute for many clients. But beyond that, I encourage clients to think beyond our Canadian borders when investing.
Why? Because from a high level, as a country and investment landscape we’re just cute. If you were to get a hold of a wealthy investor’s statement in the US, Asia or even Europe, you would rarely find any Canadian stocks or exposure within their portfolio. Not because they don’t like us but consider for starters that our index isn’t too diversified (mostly banks and energy companies), our best companies are small compared to their US and international counterparts. Putting it into context, the US represents 4% of the world’s population and contributes to 25% of world GDP. China represents 20% of the world’s population and contributes 14% to world GDP. Where do we fit in? 0.1% of world population and 2% of world GPD. Like I said, cute. Your portfolio should be representative of the globe (properly diversified across geographical allocations) and further across diversified sectors to reduce risk and enhance returns over the long-term.
I like to think of all of your household accounts as “one portfolio” and place stocks where they make the most tax sense. For instance, your Canadian stocks may be in your non-registered account, while your US and international ADR stocks in your RRSP (foreign income isn’t taxed when earned in your RRSP) and fixed income in your TFSA. That said, every person and every portfolio is unique, which is why a personalized financial plan, strategic portfolio and a thorough wealth management process are key to long-term success.
Game 2 for the Raps is this weekend on Sunday at 8pm – I know we’ll all be cheering passionately together whether it’s at the game, in Jurassic park, at a friend’s house, at a nearby bar or in my pajamas from the couch. Let’s go Raptors!
Now you are in-the-know with Word on the Street.
Enjoy the weekend.
Investment & Wealth Advisor
Chaaban Wealth Management Group