In the search for the right investments to reach your goals, it's easy to look past or take for granted the opportunities in our own backyard. But for Canadian investors, some of the world's most attractive investments are right here at home. While global diversification is important, an appropriate allocation to Canadian stocks can provide unique benefits tailored to your financial goals.

Granite rock – Canada provides an enviable base to build your portfolio upon

Canada has long been an established and leading member of the world, from its independence from Great Britain in 1867, to today’s G7-member status. And from our abundant natural resources and vast geographical span to our sophisticated economy and outstanding workers and entrepreneurs borne from world-leading universities, Canada is one of the world’s richest and most diverse nations. Our deep-seated political, financial, and economic stability stands out like a rock in an ocean of doubt and turmoil, drawing many of the brightest and best from across the world to make it their home for generations to come.

While investment management principles argue for risk-profile-appropriate investors to diversify their portfolios beyond their home markets, periodically taking the time to consider your domestic opportunities within your portfolio is also important.

Canada is blessed with top-tier financial markets that are well-regulated, liquid, and offer a diversified mix of assets, including some of the world’s greatest companies, and a strong, well-structured economy to support them. Canadian companies, their workers, and our entrepreneurs are also some of the best in the world, helping to continually innovate within existing companies, but also creating a number of the great companies – and hence investment opportunities – of the future.

Here are seven reasons to include Canada in your investment portfolio:     

1. Canada proud – a world-leading economy with rock-solid fundamentals

Canada holds a AAA credit rating from all major bond-rating agencies¹ – the gold standard for fiscal responsibility. For an investor, this rating signifies a predictable and stable economic environment where Canadian companies can thrive, with stable and reasonable government, lowering the risk associated with more volatile global markets and economies.

The Canadian economy proved its resilience in 2024, with the Bank of Canada successfully bringing inflation back to its 2% target range² after navigating through challenging global conditions brought on by the COVID-19 pandemic. This demonstrates the strength of Canada's monetary policy framework, and provides a solid foundation for companies and investors to grow and generate returns.

Canada's real GDP grew by 1.6% in 2024,³ supported by diverse economic pillars including natural resources, financial services, and emerging technology sectors. This positive growth in the face of numerous challenges translates into what is a more predictable business environment—exactly what long-term investors need. And, at over $2.2 trillion, it offers an economy that ranks 9^th in the world by GDP.³

2. Dividend gushers galore – Canadian stocks provide superior dividend yields for income-focused investors

If you're building an income stream for retirement or to meet your general cashflow needs, Canadian stocks can be a powerful tool. The Toronto Stock Exchange (TSX) typically provides dividend yields around 3%,⁴ significantly outpacing other developed markets. Recent numbers tell a compelling story, with Canadian dividend-paying stocks through the S&P/TSX Composite Dividend Index achieving an almost 20% price return in 2024.⁵

Canadian “dividend aristocrats” – companies with long histories of dividend increases – provide both income and potential capital appreciation. These companies often operate in stable, regulated industries like utilities, telecommunications, and banking, offering predictable cash flows that support reliable dividend payments. For retirees or those approaching retirement, this combination of yield and stability can form the backbone of a sustainable income strategy.

3. Oh Canada, our home and abundant land – the power of natural resources

Canada possesses vast natural resources, positioning it as a global powerhouse in the essential materials that drive the world economy. This resource wealth can provide investors with direct exposure to commodity cycles and global demand for critical materials.

The numbers are impressive: Canada's natural resources sector contributed 11.7% of the nation’s GDP in 2024,⁶ while oil and gas extraction comprised over 3% of total GDP.⁷

For Canadian investors, owning resource stocks provides certain advantages:

• Direct exposure to global commodity demand and economic growth

• Natural inflation hedging characteristics as commodity prices typically rise with inflation

• Export revenues that support the Canadian dollar

• Employment and economic activity that benefits communities across all provinces and territories

In 2024, natural resource export volumes increased by more than 5%,⁸ driven by strong global demand. This positions Canadian resource companies to benefit from continued worldwide economic expansion.

4. TSX-ellence – a sophisticated and well-diversified equity market

The Toronto Stock Exchange (TSX) is one of the world's most diversified equity markets. While natural resources form a significant component, the TSX also features strong representation across multiple sectors, allowing an investor to build a well-rounded portfolio. These sectors include:

• Financial services

• Utilities

• Information technology

• Materials (especially gold)

This diversification means you can access:

• Major banks and insurance companies with global operations

• Technology and innovation companies leading in AI and clean technology

• Industrial and manufacturing firms serving global markets

• Consumer goods and services companies

• Real Estate Investment Trusts (REITs) providing property exposure

• Utilities and infrastructure offering stability and income

The Canadian market includes companies of all sizes, from large-cap multinational corporations to smaller growth companies, providing opportunities across the entire risk-return spectrum.

5. Standing on guard for thee – world-class investor protection you can trust

Canada maintains one of the world's most robust regulatory frameworks for financial markets. This comprehensive protection gives you confidence that your investments operate in a fair and transparent environment that helps to protect you as an investor.

Multiple layers of oversight protect your interests:

• Deposit and investment protection:

Canada Deposit Insurance Corporation (CDIC)⁹ protects deposits up to $100,000 per eligible category, with no one ever losing a toonie when under CDIC protection

Canadian Investor Protection Fund (CIPF)¹⁰ protects investment accounts up to $1 million against firm insolvency

• Regulatory oversight:

Office of the Superintendent of Financial Institutions (OSFI) maintains strong capital requirements,¹¹ with major banks maintaining Common Equity Tier 1 ratios well above global regulatory minimums

Provincial securities commissions enforce strict disclosure and governance standards

Comprehensive audit and accounting standards ensure transparency for investor

This robust framework provides peace of mind, ensuring your investments are protected by strong oversight and allowing you to invest with confidence in the fairness and transparency of the country’s markets and companies.

6. Crafty Canucks – a skilled workforce driving tomorrow's innovations

Canada boasts one of the world's most educated workforces, a critical aspect to the country’s success today and into the future. As of 2024, approximately 63 per cent of Canadians aged 25-64 hold post-secondary credentials - significantly higher than the Organization for Economic Co-operation and Development (OECD) average of 41 per cent.¹² This educational advantage translates directly into competitive advantages for Canadian companies.

This deep well of talent fuels the engine of Canadian enterprise across multiple high-value sectors:

• Technology and artificial intelligence research, with over 140,000 AI professionals in Canada¹³

• Advanced manufacturing and automation capabilities

• Clean energy and environmental technologies

• Biotechnology and life sciences innovation

• Financial technology and services development

Government support amplifies this advantage. The federal government’s Budget 2024 allocated over $4.6 billion in measures to strengthen research and innovation,¹⁴ including a $2 billion AI Compute Access Fund to maintain Canada’s competitive edge in these critically important emerging technologies.¹⁵

The skilled workforce allows Canadian companies to innovate and compete on the world stage, giving you direct access to the high-value, growth-oriented businesses of tomorrow.

7. Not so loonie – investors benefit by keeping more money in their pockets

Canadian investors enjoy significant practical advantages when investing in domestic stocks that can meaningfully impact their long-term returns.

• Supporting investment:

Thanks to the Dividend Tax Credit (DTC), eligible dividends paid by Canadian companies are taxed at a much lower rate than regular income or interest for the average taxpayer - leaving more of their money to grow or end up in their pocket. Capital gains on Canadian stocks also receive favorable treatment, with only 50% of gains subject to tax.

• Currency advantages:

Having “home-based” investments also helps reduce or eliminate risks and costs associated with currency exposure:

• No foreign exchange risk on Canadian dollar investments

• Dividends and capital gains received in your home currency

• Simplified financial planning and budgeting without currency conversion concerns

• Government-sponsored, tax-advantaged, registered account benefits:

Tax-efficient structures like Registered Retirement Savings Plans and Income Funds (RRSPs/RRIFs), Tax-Free Savings Accounts (TFSAs), and Registered Education Savings Plans (RESPs) work seamlessly with Canadian securities. For example, there are no withholding taxes on Canadian dividends for Canadian residents. This integration maximizes the tax-sheltering benefits of these accounts.

For investors in higher tax brackets or those utilizing registered accounts for retirement savings, these advantages can add meaningful value to your long-term wealth building and income-producing strategies.

Canada – a foundation for lasting wealth

Investing at home is about more than just convenience. It's an investment in a stable, resource-rich economy powered by a skilled workforce and protected by world-class regulations. The combination of economic stability, attractive dividends, resource wealth, market sophistication, strong regulation, a skilled workforce, and tax advantages creates a compelling case for meaningful Canadian equity allocation.

While global diversification remains important, Canadian investors who overlook domestic opportunities may be missing investments particularly well-suited to their needs and circumstances. The strength of Canada's fundamentals provides a powerful foundation for building lasting wealth through Canadian investments.

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Sources

1. DBRS Morningstar. (2024). Canada: AAA Stable Trend Confirmed. https://dbrs.morningstar.com/research/449161/morningstar-dbrs-confirms-government-of-canada-at-aaa-stable
2. Statistics Canada. (2025). Consumer Price Index, December 2024. https://www150.statcan.gc.ca/n1/daily-quotidien/250121/dq250121b-eng.htm
3. Government of Canada. (2024). Fall Economic Statement 2024. https://budget.canada.ca/update-miseajour/2024/report-rapport/overview-apercu-en.html
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7. Export Development Canada. (2025). Canada Mining PDAC 2025. https://www.edc.ca/en/article/canada-mining-pdac2025.html
8. Canadian Association of Petroleum Producers. (2024). CAPP Data Centre. https://www.capp.ca/en/capp-data-centre/
9. Canada Deposit Insurance Corporation. (2024). What's Covered. https://www.cdic.ca/depositors/whats-covered/
10. Investopedia. (2024). Canadian Investor Protection Fund (CIPF). https://www.investopedia.com/terms/c/cipf.asp
11. Office of the Superintendent of Financial Institutions. (2024). OSFI Maintains Domestic Stability Buffer at 3.5% for December 2024. https://www.osfi-bsif.gc.ca/en/news/osfi-maintains-domestic-stability-buffer-35-december-2024
12. C.D. Howe Institute. (2025). 2024 Labour Market Review: Challenges, Trends, and Policy Solutions for Canada. https://cdhowe.org/publication/2024-labour-market-review-challenges-trends-and-policy-solutions-for-canada/
13. Insurance Portal. (2024). Artificial Intelligence is Likely to Impact Jobs. https://insurance-portal.ca/article/artificial-intelligence-is-likely-to-impact-jobs/
14. Office of the Prime Minister of Canada. (2024). Strengthening Canadian Research and Innovation. https://www.pm.gc.ca/en/news/news-releases/2024/04/19/strengthening-canadian-research-and-innovation
15. Evidence for Democracy. (2024). Budget 2024: Encouraging Investments into Research, Talent, Infrastructure, and Innovation. https://evidencefordemocracy.ca/budget-2024-encouraging-investments-into-research-talent-infrastructure-and-innovation/

This document has been prepared for use by the RBC Wealth Management member companies, RBC Dominion Securities Inc.*, RBC Phillips, Hager & North Investment Counsel Inc., RBC Global Asset Management Inc., Royal Trust Corporation of Canada and The Royal Trust Company (collectively, the “Companies”) and their affiliate, Royal Mutual Funds Inc. (RMFI). *Member – Canada Investor Protection Fund. Each of the Companies, RMFI and Royal Bank of Canada are separate corporate entities which are affiliated.

The strategies, advice and technical content in this publication are provided for the general information only and benefit of our clients. This publication is not intended to provide specific financial, investment, tax, legal, accounting or other advice for you, and should not be relied upon in that regard. Readers should consult their own professional advisor when planning to implement a strategy to ensure that individual circumstances have been considered properly and it is based on the latest available information. â/ ™ Trademark(s) of Royal Bank of Canada. Used under licence. © Royal Bank of Canada. (2025). All rights reserved.