 The
Money Management Newsletter: RSP
Planning
Small companies can create big opportunities
for your RRSP
By the Money Management Editor
Money Management Newsletter, January 2004
Most Canadians only invest their RRSP
portfolio in Canadian companies. Yet Canada only represents about three
per cent of the global markets.
Ask an Expert
posed the Diversifying globally question to Brad Radin, portfolio manager
of Templeton Global Smaller Companies Fund.
The government allows you to invest up to a maximum
of 30 per cent of the book value of your RRSP in foreign securities. To
fully diversify your RRSP portfolio and take advantage of the foreign
content amount, it's beneficial to invest globally. "Investors need
to make sure they're not missing out on a key area of investment diversification
within their RRSP: geographical location," says Radin. Furthermore.
"Foreign content exposure helps diversify your portfolio, which can
help limit your investment risk."
Including global small-cap companies into the
mix
When investing globally, it's also important to diversify
across asset class. One area is global smaller companies or small-caps
– often an overlooked and underrated investment opportunity that
can provide growth. Small-cap companies - which might carry a market cap
of up to US $1.5 billion - often have extensive and impressive histories.
Although the highs and lows of small-cap companies can be swift and dramatic,
that volatility does not necessarily imply higher risk, if diversified
in a mutual fund.
"The advantage of investing in a mutual fund portfolio
that holds anywhere from 60 to 90 global small-cap companies is that it
helps protect against risk and provides opportunity for growth,"
for instant, says Radin. "Templeton Global Smaller Companies Fund
invests in companies located all over the world, including Hong Kong,
Netherlands, Australia and Switzerland, in businesses ranging from banks,
food products, household durables to apparel."
How about duplication in a portfolio
Another advantage of investing in global small-caps
is that you can help avoid duplication and keep your RRSP portfolio diversified.
"Because these companies are smaller, they usually don't show up
on the radar screen of most global investors," says Radin. "Also
a global small-cap fund should have minimal overlap with the holdings
of the other funds in your RRSP portfolio."
Ask your Fiscal Agents
investment advisor for more information on how global small-caps
can help diversify the foreign content portion of your RRSP.
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, Fiscal Agents Money Management Newsletter
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