The “Home Bias” Reality Check

Canadian investors are famously loyal. We love our banks, our telecoms, our pipelines and to be fair, they’ve treated investors well for decades. Solid dividends, stable business models, and tax-efficient income make them easy to hold and even easier to keep adding to. But loyalty and concentration aren’t the same thing  and that’s where the home bias conversation often begins. Today, Canada represents roughly 3% of the global equity market, yet many Canadian portfolios hold 50% or more in domestic stocks.  In other words, we often invest as though the Canadian market is the world  when it’s just a small slice of it.

The Structure Problem

The TSX is heavily concentrated in financials, energy, and materials. That structure has advantages, but it also means investors are underexposed to sectors driving much of today’s global growth — technology, healthcare innovation, advanced manufacturing, and consumer platforms.

This matters more now than ever. Canada’s long-term productivity growth has lagged major peers, while global innovation leadership has largely come from companies outside our borders. Put simply: if your portfolio is mostly banks and telcos, you’re betting that yesterday’s winners will also dominate tomorrow’s opportunity set.

Diversification Isn’t Just Protection It’s Access

We often talk about diversification as a risk-management tool, and that’s true. But the stronger argument today is growth participation. Markets are driven by a surprisingly small number of exceptional businesses. Research from Professor Hendrik Bessembinder found that just about 4% of stocks created essentially all of the net wealth generated in U.S. markets over the long term.   Think about that for a moment: missing a handful of global winners can materially reduce long-term returns. Over the past 25 years, many of those outlier performers came from outside Canada — technology leaders in the United States like Apple and Microsoft, global consumer and semiconductor giants in Europe and Asia, and healthcare innovators spread across multiple regions. Investors who stayed exclusively domestic simply didn’t have access to those engines of growth. This is the real cost of home bias  not just volatility, but opportunity lost.

But What About Canadian Dividends?

Let’s be clear: Canadian equities still play an important role. Dividend tax credits, currency familiarity, and steady income are real advantages for Canadian investors. The goal isn’t abandoning Canadian stocks; it’s right-sizing them. Research suggests that a more balanced global allocation often closer to roughly one-third Canadian and two-thirds international equities — may reduce concentration risk while improving diversification.

In practice, this means keeping the banks and quality dividend payers you trust, while expanding your portfolio’s reach to the world’s largest and fastest-growing companies.

The Bottom Line

Home bias feels safe because it’s familiar. But markets don’t reward familiarity — they reward participation in innovation, productivity, and global growth. A globally diversified portfolio doesn’t just negate against Canadian economic slowdowns; it positions investors to benefit wherever the next generation of market leaders emerges. The question isn’t whether Canadian companies deserve a place in your portfolio. They do. The question is whether they deserve most of it.

‍

^{Grant White is a Portfolio Manager /Investment Advisor at Endeavour Wealth Management with iA Private Wealth Inc., an award winning office as recognized by the Carson Group. Together with his partners, he provides comprehensive wealth management planning for business owners, professionals and individual families. This information has been prepared by Grant White, who is a Portfolio Manager for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained here in may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces in which they are registered. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization. iA Private Wealth is a trademark and a business name under which iA Private Wealth Inc. operates *Insurance products and services are offered through Endeavour Wealth Management Inc, an independent and separate company from iA Private Wealth Inc. Only products and services offered through iA Private Wealth Inc. are covered by the Canadian Investor Protection Fund.}