Toronto Stock Exchange (TSX) Stock Market Holidays

As is the case with every major stock exchange, the Toronto Stock Exchange has a benchmark index. In the case of the Toronto Stock Exchange that is the TSX Composite Index. This index gives investors exposure to a basket of stocks representing approximately 250 companies that comprise about 70% of the market capitalization of the exchange. The index is rebalanced quarterly in March, June, September, and December.

The TSX Index replaced the TSE 300 Index which was launched in 1975 with a base level of 1,000. The index closed at an all-time high of 21,768.53 on November 12, 2021, and the intraday record high of 21,796.16 was made just a few days later on November 16, 2021.

Experienced investors understand the importance of diversification in a portfolio. One way for investors to achieve diversification is to look for stocks outside of their home country. This provides diversification because, at times, foreign stocks will outperform U.S. stocks and vice-versa.

And there are a couple of reasons to choose Canadian stocks in particular. First, as of February 2022, Canadian stocks had a collective value of $3.3 trillion. Although that is only about 10% of the U.S. equity market, the TSX provides exposure to world-class companies in three critical sectors: financials, energy, and materials.

Secondly, when investors limit their selections found on the TSX Composite Index they are getting companies that have solid balance sheets, strong management, and a history of revenue and earnings growth. Investors with even a lower risk tolerance can look for stocks that are trading on the TSX 60 which is comprised of 60 Canadian blue-chip stocks (i.e. the best of the best).

U.S. investors can’t buy stocks directly on the Toronto Stock Exchange. However, many of the stocks that are part of the TSX Index have a dual listing on either the NYSE or NASDAQ. This means that some stocks trade in Canadian dollars on the TSX as well as in U.S, dollars on its United States equivalent exchange.

One example of a Canadian company with a dual listing is Barrick Gold. The gold mining stock trades on the Toronto Stock Exchange under the ticker symbol (TSE:ABX) and the New York Stock Exchange under the ticker symbol (NYSE:GOLD).

Another option is to buy shares of a mutual fund or exchange-traded fund (ETF) that provides exposure to companies in the TSX. There is no single fund that provides exposure to the entire TSX like the SPY does for the S&P 500. However, investors can choose a fund such as the iShares MSCI Canada ETF (NYSEARCA:EWC) to get exposure to a basket of Canadian equities. The fund is valued at over $4 billion and has been in existence for over 25 years.

A dual listing on the NYSE or NASDAQ gives the company exposure to the U.S. capital market. It also improves the liquidity of a company’s shares and can raise its public profile.

There are also benefits for investors because companies that elect to be dual listed have to follow the regulatory requirement of the U.S. markets in addition to that of their home country. This is an expense in time, money, and resources for the company. But the trade-off is worth it and usually has no effect on the company’s stock price.

Investors who are looking for broad diversification should consider Canadian stocks. One concern about the TSX is the composition is heavily weighted towards cyclical stocks. For example as of February 2022 financials (33.5%), energy (14.8%) and industrials (11.7%) made up nearly 60% of the index. That may be too much for some investors particularly because those sectors all tend to correlate roughly the same way as the economic cycle. But as a long-term play, TSX stocks are worth considering with a small part of your portfolio.