Q&A: Do I have to monitor my foreign content myself?

Zoomer | January 1st, 2002

Question: Does the 20% foreign content rule imply that I have to constantly monitor my portfolio to ensure that this ratio is not violated with market appreciation/depreciation, or does this rule only apply to my initial investment?

Gordon Pape’s answer: For a simple example, I put $1,000 into my RRSP and buy two funds: $800 into a Canadian fund, and $200 to a foreign fund. At some point, the foreign fund surges ahead of the Candian fund so that it is worth $300 while the Canadian drops to $700. Now 30% of my portfolio is foreign… What do I do now?

Actually, the company that holds your RRSP should do the monitoring for you. However, the key point is that the 20% foreign content is based on book value – the price you originally paid for the shares. Any change in the market price does not affect your limit, as long as you don’t sell.