The Trifecta Approach
Over the decades I was certainly familiar with the need for diversity…investment type and geographically. Over the last few years as I sought an “after work” plan, we struggled with just where to spend time. Would it be Canada and perhaps a warmer area within its boundaries? Not many of those – at least year around. Perhaps the USA or further south? We looked at Europe, notably Portugal and Spain…also the Adriatic coast.
As we researched, we realized no one place has it all and we became concerned about choosing just one. Like investments, no one category or country offers satisfaction at all times. The more we researched, the more a “trifecta” approach to residency seemed a reasonable solution (courtesy of Andrew Henderson, founder of Nomad Capitalist).
I have pretty much always taken the same approach with currency. Average Canadians are by far mostly a home biased group. Their homes (if owned), CPP, OAS, pensions, RRSP’s and most non-registered investments are all in Canadian Dollars (CAD). Being that Canada represents only about 3% of global market shares[i],it’s a huge bet in favor of Canada; However, it leaves a lot of money on the table. Now, we do have some awesome companies here such as our banks, Brookfield Asset Management, CN and CPKC railways to name a few. However, restricting oneself to Canada has its negative points. First, we are predominately a drawer of water/huer of wood – basically a resource economy, followed by financials (banks and related money industries). These two categories make up about two thirds of our economy[ii]. There is no VISA, CAT, L’oreal, Berkshire Hathaway to be found in the Canadian market. Hence the need to look elsewhere for long term growth in industries and businesses we just don’t have here. Additionally, owning L’Oréal and Berkshire gives you one more benefit – another currency! The CAD is not the place people flock to in times of trouble. It has also not held up very well compared to these other two currencies (USD & EURO). Currency is also a determinant of wealth. If the CAD fell 25% (only an example) your purchasing power in the USA, Europe and most other places just fell 25% and would be no different than if the investment itself fell 25%. Having exposure to these two other currencies (and possibly Swiss Francs or Japanese Yen) is a nice added benefit that can help protect your wealth and even grow it.
Where we learned about and applied the “trifecta approach” was in looking ahead and trying to determine where to allocate our time. Some places like the southern USA or Latin America are too hot in summer months – at least for me. Some, like Portugal are to cool for others in the winter months (guess who I’m referring to here). The northern USA and Canada are pretty darned nice from Victoria Day in May until Thanksgiving, but not very pleasant in-between if you are not a fan of cold long winters.
Thus, we settled on accepting that like investments, no one place has it all. Personally, we will spend at least six months in Panama for residency reasons and then explore other options when the heat of summer and the rainy season move in. Like investments, different locales offer unique benefits and most are great places to spend time. Like investments and currencies, it’s a fluid theme and will require rebalancing or even outright changes. However, we feel diversity is a great thing overall in everything we do and see.
Finding your balance to the above is key. One thing I am certain of based on nearly 40 years in the investment industry and seeing and learning through the travel experiences of many clients – It’s better to seek out the world than to restrict yourself to only one country and its currency when investing. The same applies for travel and residency in my opinion. Both can be exceptionally rewarding.
[i] Published by Statista Research Department, & 30, M. (2023, March 30). Global Stock Markets by country 2023. Statista. https://www.statista.com/statistics/710680/global-stock-markets-by-country/
[ii] S&P Global. (2023, August 31). S&P/TSX Composite Fact Sheet.
