U.S. equity investing: Myths versus reality

Many Canadian investors keep their money close to home, holding mostly Canadian stocks. It feels safe and familiar. But sticking to one market can quietly limit your growth and leave your portfolio more exposed than you think.

The U.S. equity market is the largest in the world, and adding U.S. stocks is one of the simplest ways to diversify. So why do so many Canadians hold back? Usually, it comes down to a handful of myths. Let's clear up the four most common ones and give you straight answers to the questions you're probably already asking.

Myth #1: I can build a diversified portfolio with only Canadian stocks

Not really. A portfolio of only Canadian equities carries significant concentration risk, because Canada makes up just 3% of the world's equity market.

Here's why that matters. Over two-thirds of Canada's equity market sits in only three of the world's 10 main industry sectors:

• Financials: ~34%
• Materials: ~18%
• Energy: ~17%

So even a "balanced" Canadian portfolio leans heavily on those three areas, whether you planned it that way or not.

The U.S. market looks very different. It represents more than half of the world's equity market, and the S&P 500 Index gives you far more exposure to fast-growing sectors:

• Information technology: 27%
• Health care: 16%
• Consumer discretionary: 8%

Adding U.S. equities lets you tap into high-growth sectors that are barely represented, or missing entirely, at home. Owning stocks across more sectors also smooths out your risk. When one or two sectors dip, gains elsewhere can help offset the losses.

Myth #2: I need a U.S. dollar account to buy U.S. stocks

No. You can buy, sell and hold U.S. equities right inside your Canadian dollar account at Qtrade Direct Investing.

That means adding U.S. exposure can be as simple as your next trade. You manage everything in one place, online or on the app, wherever you are.

Myth #3: Currency fluctuations will wipe out my U.S. stock gains

Over the long term, currency swings rarely erase your gains, and U.S. dollar exposure can actually work in your favour.

It's fair to feel cautious about currency. Exchange rates move around, and some investors avoid U.S. equities entirely because of it. But sitting on the sidelines does your portfolio a disservice.

Here's the upside. Adding U.S. equities gives your portfolio U.S. dollar exposure, which can act as a built-in hedge.

Still uneasy about foreign currency? Consider these options with built-in currency hedging:

• Currency-hedged ETFs
• Canadian Depositary Receipts (CDRs)

Myth # 4: Investing in U.S. stocks is too complicated

With the right platform, buying U.S. stocks is about as straightforward as buying Canadian ones.

We recently updated the Qtrade platform to make investing in U.S. equities simpler, with clarity built into every foreign exchange (FX) transaction. When you buy or sell a U.S. stock in your Canadian dollar trading account, Qtrade shows you real-time FX quotes right on the trade order screen.

It's always smart to time your U.S. trades when exchange rates look favourable. But it matters even more to keep your eyes on long-term returns rather than short-term currency swings. And if FX volatility still gives you pause, a currency-hedged ETF or CDR can be a great fit.

Ready to put the U.S. market to work for you?

The world's largest equity market is open to you, and adding U.S. exposure is one of the most practical ways to diversify, manage risk and build lasting wealth.

You don't need a separate account, perfect timing or a finance degree to get started. You just need a plan and a platform that makes it simple.

Log in to Qtrade Direct Investing today to place your first U.S. equity trade or explore our education hub to keep building your know-how.