Invest Only in Canada?

As I write this, one Canadian dollar is worth about seventy four cents American. A few years ago, Canadian consumers were up in arms that our strong dollar was not being respected by Canadian stores selling goods from the US, which were still 20 or 30% higher than the readily available comparison prices that Canadians could see with a quick Internet search. There were so many articles written or shown on television about how much Canadians were feeling ripped off at the time.

Now, things are back to about what Canadians would have seen in about 2009. My wife and I are looking for places to travel to in April, and Mexico has gotten significantly more expensive for us than it was a year ago when we went. Our main huge “splurge” every year for the past four or five years has been an all-inclusive trip away, where we bring stacks of books and try to read them all between trips to buffets and bars. Going away someplace warm is something that we both really enjoy, so we’ll have to be a little more discerning with our destination this year and maybe go somewhere a little less fancy than we have been heading to the last few years.

Besides vacations, US securities have become much more expensive to buy. Being a frugal individual, buying stocks at a premium is something that I don’t really want to do, to watch my investments reduce in value over the next few years if the Canadian dollar recovers to previous levels.

The problem with any investment, is that it’s a bit of a gamble. When you put your money into a company, whether it’s in your own domestic currency or in foreign dollars, nobody has any idea of what the investment is going to do. If everything works as planned (this is my basic plan), the value of your investment over the long-term will hopefully increase. I would much rather know before I dropped a few thousand dollars on an investment that it was going to make me rich, but (as far as I know) nobody is privy to that sort of information.

While I would have preferred to have invested a bunch of money in US dollars a year ago when the Canadian dollar was much more valuable, I don’t think it’s a good idea to disregard the rest of the world’s market because nobody wants to buy Canadian securities. Even though the Canadian dollar is beaten up right now, staying diversified by investing outside of Canada seems like a better idea than depending solely on the Canadian economy in the long-term.

Besides being diversified, the Canadian economy could continue to significantly lag behind the US, given our reliance on natural resources for exports, which would make the current value of the Canadian dollar compared to US or other world currencies seem like a good deal.

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