U.S. EQUITY MARKETS
5 reasons why you should consider some
U.S. holdings as part of a well balanced portfolio.
Diversification
The Canadian equity markets account for roughly 4%
of the world market in terms of capitalization. By contrast, the U.S.
accounts for over 35%. Given the relative size of the U.S. equity markets, the
number of quality investments available is significantly larger. As well, the
Canadian economy is predominately resource based, whereas the U.S. economy is
more broadly based.
Access To Information
With the close geographic proximity of Canada to the U.S., Canadians have the advantage of easy access to information
on companies south of the border. There are a whole host of independent
sources that provide information on U.S. companies including: research reports,
newsletters, newspapers, earnings estimates and real-time data. The
sheer volume of information available may actually make researching and evaluating a
U.S. company easier than a comparable Canadian
company.
Participation In Foreign Markets
Finding good quality companies to invest in overseas can be both time consuming and costly. The
differences in accounting practices and disclosure requirements make evaluating company
performance very difficult. As well, foreign market transaction costs
can be significantly more expensive than in the U.S. By investing in large U.S.
multinational corporations that generate revenue from sales overseas,
you can gain exposure to foreign markets without having to research and trade
foreign companies directly.
Liquidity & Market Efficiency
The U.S. equity markets are considered the most efficient and liquid in the world. Many large U.S.
companies trade millions of shares per day. With volumes of this size, the shares
are efficiently priced with very narrow bid/ask spreads. This provides
investors with easier access to their funds in case of a market downturn or if
another buying opportunity presents itself.
Options
The U.S. option market is also the largest and most liquid
in the world. Many Canadian companies that are interlisted on U.S.
exchanges, have options listed in the U.S. Because of the relative size of the U.S.
market, it may make sense, where possible, to trade options on Canadian companies
in the U.S.
The above points are just a few reasons why Canadian
investors should consider tapping into the vast opportunities available in the United
States. At TD Waterhouse, we offer our clients exclusive discounts on a broad
selection of research products to help them evaluate U.S. industries and companies.
And if you decide to invest in a U.S. security, you know that TD Waterhouse will
execute your trade quickly, efficiently and at a low cost.
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