daniel chigunwe
Isaac Jonas
For Zimbabwean investors, the thrill of participating in the US and Canadian markets lies in their potential for stability and growth, offering a way to spread risk and possibly enhance returns. Here’s how you can explore these opportunities with just a basic understanding of finance.
What is diversification?
Diversification is like not putting all your eggs in one basket. Instead of relying solely on local investments, you spread your money across different types of investments, in this case, across different countries. This can protect your wealth from local economic swings.
Investing in broad market indices
ETFs (Exchange-Traded Funds) are a great way to start:
US S&P 500: This index includes the 500 largest companies in the US. Investing in an ETF that tracks this index gives you a piece of all these companies, from tech giants to traditional businesses, reducing the risk compared to picking one stock.
This is where I invest most of my money and historically, while the past can not guarantee the future, US S&P 500 has been shown to beat more than 90 percent professional investors in the US.
Canadian S&P/TSX composite: Similarly, this index represents the largest companies in Canada, giving you exposure to Canadian economic health.
Why this matters: By investing in these indices, you’re not betting on one company’s success but on the overall market’s performance, which tends to be more stable over time. Note, I invest in an Index through an ETF not in the index itself.
Sector-specific investments
US technology: Known for innovation, the US tech sector includes companies like Apple or Microsoft. These can offer growth but come with their own risks due to rapid changes in technology.
Canadian natural resources: Canada has vast natural resources. Investing in this sector can be lucrative, especially with global demand for energy and minerals.
Why look here: These sectors have historically shown strong performance, offering potential for growth that might not be available locally.
Currency diversification
When your local currency weakens, investments in USD or CAD can act like a financial shield:
Hedging against depreciation: If the Zimbabwean dollar (ZiG) falls, your investments in stronger currencies could increase in value relative to your local currency.
Stability: North American markets are known for their stability compared to some emerging markets, providing a safe haven for your capital.
How to Get Started for Zimbabwean Investors
Education: Learn the basics. Websites, books, or even local newspaper articles can help. My book can be a starting point, “The Intelligent Millennial Investor” It’s available on my website :www.streetwiseeconomics.com.
Brokerage accounts: Look for online brokers that allow international investing. Some platforms cater specifically to non-residents.
Start small: You don’t need a large sum to begin. Even small investments in ETFs can grow over time.
Diversify: Don’t just invest in one area. Spread across different sectors and countries.
Keep learning: The markets, especially technology and commodities, evolve. Stay informed.
Conclusion
Diversifying into the US and Canadian markets can be a step towards financial security, offering exposure to stable and growing economies. It’s about balancing risk and reward, providing a cushion against local economic volatility.
Isaac Jonas, a Canadian economist and consultant at Streetwise Economics, simplifies investing for everyone, offering practical guidance on navigating US and Canadian markets. His insights are shared through social media and his YouTube channel, Streetwise Economics. Please remember, his content is educational and not personalised advice. Investing carries risks, so consulting a financial advisor before decisions is advised. For tailored coaching on investing and trading in the financial markets, Please visit www.streetwiseeconomics.com or email [email protected] to schedule a time slot for consultation.
Bongani Ndlovu