Adding Canadian dollar-denominated assets can hedge against currency risk in a USD-dominated portfolio. Diversification into other currencies can mitigate the impact of exchange rate fluctuations.
Canada's economy is often considered stable, with sound fiscal policies and a well-regulated financial system. Investing in Canadian assets can offer stability and reduce overall portfolio volatility.
Canada is rich in natural resources, including oil, minerals, and timber. Investing in Canadian assets provides exposure to these commodities, which can diversify the portfolio and potentially offer protection against inflation.
Canada's geopolitical situation, being closely tied to the United States, offers a degree of political stability. Including Canadian assets can provide some insulation against geopolitical risks that may affect solely US-based investments.
Diversifying into Canadian assets allows investors to benefit from interest rate differentials between the US and Canada. If Canadian interest rates rise relative to US rates, it can enhance returns on Canadian investments.
Canada's economy encompasses various sectors, including finance, technology, energy, and healthcare. Investing in Canadian assets provides exposure to these sectors, further diversifying the portfolio beyond US-centric industries.
Historically, Canadian assets have shown resilience during periods of inflation. Including Canadian dollar-denominated assets can serve as a hedge against rising inflationary pressures in a USD-dominated portfolio.
By incorporating Canadian assets, investors can optimize their portfolio's risk-return profile. Through proper diversification, they can achieve better risk-adjusted returns and reduce the overall correlation with US markets, potentially enhancing long-term performance.