Myth 4: Foreign investment is very risky

Even the most savvy investors find themselves wondering about this one from time to time. Surely, you may think, investing in an emerging economy like China, or even in developed countries like Europe must be riskier than investing here at home.

Well, keep this in mind. The Canadian economy has experienced dramatic growth over the past several years, outpacing other G8 countries. What that means is that our stocks have benefited from this growth, and, today, they are more expensive than stocks in many other countries.

When you buy a stock at its peak, you're "buying high". And what you really want to do in investing is "buy low" and "sell high".

Myth 1 Myth 2 Myth 3 Myth 4 Myth 5 Myth 6 Myth 7 Myth 8 Myth 9

The best approach may be to diversify your investments by owning a mix of international holdings that complement your Canadian investments. How can this work? Some industries are underrepresented in Canada - for example, biotechnology - but you can gain exposure to these industries in other countries. The end result will be a more well-rounded portfolio that can help to protect you if the Canadian economy stumbles.

The bottom line? Diversifying internationally. When it's done right, it should mean less risk, not more risk in your portfolio. And, it's much easier to do that now that foreign content restrictions on RRSPs have been lifted.