Why Sticking Solely to SPY Stock Could Limit Your Portfolio’s Potential

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Written by Jed Lloren at The Motley Fool Canada

Many Canadian investors insist on sticking to Canadian stocks. This makes sense because Canadians should be more familiar with the companies that they interact with on a daily basis. However, forgetting to diversify your portfolio could be a big mistake. This could be for a number of reasons.

Most importantly, investing in just one economy could spell disaster if that region were to be hit by rough financial conditions (e.g., a recession). In addition, forgoing stocks from other countries could hold you back from some of the best investment opportunities in the world.

If you’re looking for an easy way to diversify, consider the American stock market. There are tons of outstanding companies listed in the U.S. that Canadians should be very familiar with. For many investors, they may even just choose to buy shares of the SPDR S&P 500 ETF Trust. This is an exchange-traded fund that tracks the performance of 500 large American companies. However, that could also be holding back your portfolio’s performance.

Because you’d be investing in such a large number of companies, many of the lesser companies could hold back the returns that the true market winners generate. In this article, I’ll discuss two American-listed companies that Canadian investors should consider adding to their portfolios today.

One of the largest companies in the world

If you’re looking for a low-risk, high-reward American stock to hold in your portfolio, consider Procter and Gamble (NYSE:PG). This is one of the largest consumer staple companies in the world. Procter and Gamble is the parent company of many well-known brands such as Pampers, Tide, Charmin, Gillette, Crest, and more than 30 others.

Over the past five years, Procter and Gamble stock has gained more than 62%. To put that into perspective, the S&P 500 has gained 61% over the same period. However, what makes Procter and Gamble’s return more impressive is that those numbers don’t include its nearly 2.5% dividend yield. Because of its status as a Dividend Aristocrat, Procter and Gamble is a stock that investors should feel comfortable holding, regardless of what the economy looks like.

You rely on this company every day

Visa (NYSE:V) is another American stock that could help Canadians generate wealth. Obviously, this is one of the biggest credit card companies in the world. It’s estimated that Visa holds a 62% share of the American credit card market and 40% globally. Of course, there are large competitors, but I don’t believe there has to be a single winner in that space. Visa could still be a very relevant company for decades to come.

Over the past five years, this stock has gained nearly 75%. That outpaces the broader market by a comfortable margin. Although it isn’t listed as a Dividend Aristocrat, I think it’s only a matter of time before it reaches that status.

The post Why Sticking Solely to SPY Stock Could Limit Your Portfolio’s Potential appeared first on The Motley Fool Canada.

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Fool contributor Jed Lloren has no position in any of the stocks mentioned. The Motley Fool recommends Visa. The Motley Fool has a disclosure policy.