How much of your investment portfolio should be in Canadian stocks? Experts weigh in

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Portfolio Diversification,Canadian Stock Market,Canadian Equities

'If you have an over-allocation, you have more potential for volatility in the portfolio.'

The report found that Canadians allocate 50 per cent of their equity exposure to domestic holdings, down from 67 per cent in 2012. However, Canadian stocks make up only around three per cent of the global stock market, meaning an excessive home bias remains.

The solution, they agree, is greater global diversification. But what’s the right mix of domestic and international stocks in a Canadian portfolio?Based on 10,000 simulations from its proprietary modelling tool, Vanguard found that allocating 30 per cent to Canadian equities and 70 per cent to international equities was optimal for Canadian investors to “minimize the long-term volatility of their portfolio.

Canadians investing in Canadian companies may also enjoy some tax benefits, Sheluk and Dewan note, particularly through the preferential treatment of dividends. According to Vanguard’s analysis, the tax liability of a Canadian in the highest tax bracket who receives $100,000 in distributions from Canadian stocks would be $37,813. If they receive the same amount of distributions from global ex-Canada stocks, their tax liability would be $53,492.

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