Q&A With Gordon Pape: Should I Move to International and Emerging Market Stocks

Global Stocks

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In this Q&A, financial expert Gordon Pape provides some simple advice to a reader whose financial advisor is pushing for him to move money to international and emerging market stocks.


Q – I am retired with a large cash cushion in ISA (individual savings account), GICs, and high interest savings accounts – enough to last us five years. The rest of our assets are 100 per cent equities, and we earn a decent dividend income from these, not to mention capital appreciation as we are long-term holders and not prone to sell in a downturn.

My question: Our for-fee advisor (who does not manage our portfolio) wants us to shift from mostly U.S. and Canadian stocks to 45 per cent international and emerging market stocks. We are not comfortable with that. Our current exposure is around 10 per cent and seems more than sufficient.

We are not seeking stellar, swing for the fences returns – just steady eddy returns. Our portfolio has done that.

The U.S. market has done much better on a compounded after inflation basis than EAFE or EM, so why shift to those markets for one of their possibly brief outperformance periods over the S&P 500 only to revert soon thereafter to returns that lag the TSX or S&P 500? Many thanks. – Peter H.

A – You answered your own question when you wrote: “We are not comfortable with that”. I would never advise anyone to do something they weren’t comfortable with, even if I thought it was a world-beating strategy. Being able to sleep well at night far outweighs the few extra dollars you might earn. – G.P.

Gordon Pape

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