(January 26 – 16:00 ET) – Canadian equities have been performing well and that may distract investors from global opportunities, says Stephen Murray, Vice-President, CT Investment Management Group Inc. “Global exposure within an RSP can potentially reduce risk and increase returns,” says Murray.

“The economic forecast for Canada is very positive. However, Canada accounts for less than three per cent of the world’s investment opportunities,” said Steve Saldanha, Economist, CT Investment Management Group Inc.

Historically, both U.S. and global markets have significantly outperformed Canada. While the performance gap is expected to narrow, global markets are expected to remain strong. As of December 31, 1999, the 30-year annualized rates of return in Canadian dollars for the Standard & Poor’s 500, a U.S. index, and Morgan Stanley World Gross Dividend , a global index, were 14.87 per cent and 13.95 per cent respectively.

For the same period, the Toronto Stock Exchange 300 , a Canadian index, had an annualized rate of return of 11.07 per cent. Put into dollars and cents, excluding tax implications, $10,000 invested in Canadian dollars in the S&P 500 and MS World GD 30 years ago would be worth $640,178.49 and $502,819.42 respectively, says Saldanha. The same $10,000 invested in the TSE 300 would be worth $233,030.01, he says

“RSP investors should view the 20 per cent foreign content limit as the floor not the ceiling,” advises Murray. “Even the most conservative investors should be playing by the rules and maximizing their allowable limit. The first 20 per cent global exposure within an RSP reduces the overall risk of the portfolio.”

He offers the following tips to maximize global exposure:

1) Top up the allowable foreign content within your RSP portfolio. Invest with a company that has a free foreign content monitoring service to ensure you do not exceed the foreign content limit.
2) Consolidate your RSP portfolios. The 20 per cent foreign content limit applies to each RSP plan. If you have more than one RSP account, you might not be taking full advantage of your allowable room.
3) Look into your domestic funds. Fund managers are bound by the same foreign-content rules as individual investors. That means Canadian mutual funds can hold up to 20 per cent of their book value in international holdings, further increasing investors global exposure.
4) Maximize your global exposure with RSP-eligible funds. These specialty global funds give investors access to international markets but don’t count as foreign content.
-IE Staff