The problem many Canadian investors have is that too much of their portfolios are invested in Canadian stocks. Most financial advisors will attest to the fact that diversification is important; however, most of the discussion surrounding diversification in centred on diversifying North American equities across sectors rather than diversifying geographically.
There are two excellent ways that investors can diversify outside North America and look further east for growth opportunities that trump many of the domestic investments available on the TSX (though both of these options are traded on the TSX).
Dream Global REIT
One of my favourite global diversification plays for Canadian investors is Dream Global REIT (TSX:DRG.UN), not only because this is a real estate investment trust (REIT), which in and of itself provides diversification for a portfolio consisting of equities only, but because the company’s real estate is located in Europe, focused in the German and Austrian market — two markets which have some of the safest real estate globally and very attractive prices (and yields) when compared to large North American REITs.
With a dividend yield currently sitting at 7.25%, and a stock price which is poised to break through an upper resistance level towards a higher valuation multiple (currently sporting a 17 price-to-earnings ratio), Dream Global REIT stands to profit from very high lease rates and low vacancy rates with large corporate clients, such as Deutsche Post, signing on for additional long-term leases, securing long-term cash flows for investors and further stabilizing the REIT’s yield and capital-appreciation potential.
Fairfax India Holdings Corp.
Looking much further east, Fairfax India Holdings Corp. (TSX:FIH.U) is a holdings company invested in some of the best businesses in India, from financial services and banking to chemical, manufacturing, and industrial businesses; owning a piece of Fairfax India is therefore the same as holding a portfolio of blue-chip Indian stocks without doing the research.
With India poised to break out as a global growth leader (currently, growth rates in India far surpass growth rates in China and other developing nations, which have long been touted as the places to invest), Indian firms have largely been overlooked by North American investors due in part to the fact that it is very difficult to analyze and assess all the options available on the Indian exchange — an exchange with thousands of stocks available to investors.
Bottom line
Both Dream Global REIT and Fairfax India are great places to start for Canadian investors looking to put some money to work abroad. Be sure to contact a financial advisor before making investment decisions in global equities.
Stay Foolish, my friends.
