A lot of folks don’t realize that the primary residence exemption in Canada is unlimited.
Personally, I wouldn’t consider my home as part of my portfolio. If you’re worried about concentration risk, investing outside Canada doesn’t change that you still have half your portfolio in one real estate asset.
My personal residence doesn’t feel tied to stocks. I bought in 2007, stocks dropped in 2008, but home values didn’t change much. The current house I’m in has tripled in value since then, but stocks are up only 80%.
For me, my house is where I live and raise my family. I’ll sleep there for years. If it’s worth the same in 40 years, I’d still buy it again.
Your stock choices should give you growth potential. If you’re after broader diversification, options like the S&P 500 or VT (which has only 2.7% in Canada) make sense.
I live abroad and own a rental property in Canada.
My lower Canadian home bias isn’t just because of the property but also because of tax efficiency based on where I live now. This home is more of a backup plan if I ever want to move back rather than an investment factor.
Why have home bias at all? Use something like VXC instead of VEQT.
Real estate prices don’t correlate much with the stock market. So no, I wouldn’t adjust the geographic allocation of your stocks because of a house.
I think about this myself. A few things come to mind:
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If this is your ‘forever home,’ the ‘not an investment’ argument is stronger. But if you plan to sell one day, then yeah, it’s an asset.
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Real estate isn’t the same as investing in Canadian stocks or property ETFs.
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Housing markets aren’t all the same. Rural properties differ from urban condos, which differ from family homes.
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If you’re invested in Canada because you believe in the economy, that’s a factor to consider. A lot of people think Canada is lagging in some areas. Does that mean invest elsewhere, or is this the time to buy?
For myself, I’m in Canada for the long haul, and I own my place. Right now, my investments are about 30% Canada, 57% U.S., and 13% elsewhere.
I’d say yes!
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A big reason for home bias is currency hedging. You’ve already got a major CAD asset in your home.
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I don’t agree with ‘your home isn’t an investment.’ You can access its value through downsizing, refinancing, or a HELOC.
Curious, what’s the value in having any ‘home bias’?
I see my house as an investment.
Historically, Canadian home prices don’t seem to move much with the stock market, except in extreme local cases (like Fort McMurray). Maybe that will change in the future?
Most people here would likely invest in the market over paying down their mortgage if market returns are higher than their interest rate.
I personally don’t invest in Canadian stocks in my portfolio. Other than some CAD ETFs that track U.S. markets without FX rates.
I don’t get why people stick to 30% in Canadian equities. Feels pretty random.
@Dolph
Yeah, some studies say it’s better for risk-adjusted returns, but that’s based on data from when globalization was booming. Canada’s economy is heavily tied to real estate, and it’s such a small part of the world economy — the 30% rule doesn’t make much sense.
I wouldn’t have any home bias, house or no house.