How to Add Safe Global Exposure to Your RRSP

Sun Life Financial Inc. (TSX:SLF) (NYSE:SLF) and a top Canadian bank are two stocks that can help investors get global exposure without taking on unnecessary risks.

| More on:

Canadian investors are often advised to look beyond the home country when investing funds in their self-directed RRSP portfolios. Diversification is wise and the objective can be achieved in a variety of ways.

Foreign stocks

Investors might consider purchasing the shares of foreign companies on international exchanges, but most people should probably avoid this option. Costs can be punitive and foreign currency fluctuations can make things more complicated. In addition, geopolitical uncertainty must be considered when evaluating country-specific investments.

As such, this strategy should probably be left to the experts.

ETFs and mutual funds

ETFs and mutual funds that focus on a basket of international stocks are one way to get exposure to certain countries or regional markets without buying the individual shares. Fees are associated with the level of convenience, so investors have to consider the costs when going this route. It is also important to closely examine the holdings, as a few bad apples can trigger ugly performances.

Canadian stocks with international operations

Another way to gain international exposure while minimizing costs and risks would be to buy Canadian companies with significant business operations overseas. You make the purchase in Canadian dollars in your regular trading account and have the benefit of a safe and stable geopolitical situation at home with transparent reporting.

Let’s take a look at two stocks that might be interesting picks to diversify your RRSP holdings.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is Canada’s third-largest bank with a market capitalization of $87 billion. The Canadian banks are considered among the safest on the planet and that should continue to be the case.

Bank of Nova Scotia is an interesting choice, as it has invested billions of dollars to build a large international division primarily focused on Mexico, Peru, Chile, and Colombia. The four Latin American countries are home to more than 225 million people and form the core of the Pacific Alliance trade bloc. Goods, capital, and labour can move freely among the countries; they have even linked their stock exchanges.

Bank of Nova Scotia is positioned well to benefit from rising middle class wealth and the region is already generating strong results for the bank. The international division accounts for more than 30% of Bank of Nova Scotia’s profits.

The company pays a solid dividend with a 4.9% yield.

Sun Life Financial

Sun Life Financial (TSX:SLF)(NYSE:SLF) has insurance, wealth management, and asset management operation in Canada, the United States, the U.K., and Asia.

The Asia group likely offer the most promise for future growth, as Sun Life has established subsidiaries or partnerships in the region’s most populated countries. India, China, and Indonesia are among the markets served by Sun Life, and the long-term potential in these markets is significant.

The Asian operations generated 16% of Q1 2019 underlying net income, and investors should see the region continue to increase its part of the overall profit pie in the coming years.

The bottom line

Investors have a variety of options when it comes to diversifying their geographic exposure in their RRSP. The easiest way might be to buy top-quality Canadian stocks with large international businesses, such as Bank of Nova Scotia and Sun Life.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker has no position in any stock mentioned. Bank of Nova Scotia is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Canadian Dollars bills
Dividend Stocks

3 Monthly-Paying Dividend Stocks to Boost Your Passive Income

Given their healthy cash flows and high yields, these three monthly-paying dividend stocks could boost your passive income.

Read more »

Make a choice, path to success, sign
Dividend Stocks

The TFSA Blueprint to Generate $3,695.48 in Yearly Passive Income

The blueprint to generate yearly passive income in a TFSA is to maximize the contribution limits.

Read more »

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »