Most Canadians (80%) say they need annual returns of 4% or higher to reach their retirement savings goals, finds a new CIBC Asset Management poll.
Yet, nearly 70% of those polled primarily hold guaranteed investment products since they’re wary of markets.
“Fear is still affecting investment decisions and keeping Canadians from meeting their goal[s],” says Steve Fiorelli, managing director at CIBC Asset Management. “The disconnect between investors’ return expectations and portfolio allocations could be a barrier, especially as we see continued downward pressure on interest rates.”
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Fiorelli adds the sharp increase in market volatility since oil prices collapsed has amplified people’s markets fears. But, he notes, investors should consider that Canada’s main market still managed to return 10.6%, including dividends, in 2014.
Further, looking over the past decade, the S&P/TSX Composite Total Return Index posted an annualized return of 7.6%.
“For investors very close to retirement or those with low risk tolerances, a guaranteed product is an option,” says Fiorelli. Those with longer time horizons, though, must look for alternative options.
Key poll findings
The main reasons Canadians aren’t considering riskier investments and allocation mixes are:
- more than half (67%) are afraid of losing their capital and/or original investments;
- about one in ten investors (9%) find riskier investments are too complex;
- the same number (9%) aren’t aware of their portfolio options; and
- a small group of those polled (5%) want to avoid extra fees, while 3% are too close to retirement.
Below is a breakdown of what those polled expect to invest in over the next few years.
|Preferred investment mix|
|Stocks, including mutual funds holding stocks||42%|
|GICs, savings accounts or other guaranteed investments||42%|
|Bonds, including mutual funds holding bonds||12%|