How Canadian investors show discipline

By Staff | November 6, 2017 | Last updated on November 6, 2017
2 min read

Your clients deserve a pat on the back for good behaviour.

That’s because Canadian investors recently exhibited discipline in their risk appetites — despite above-average market returns and below-average volatility, finds Vanguard, using its risk speedometer.

Such behaviour is a positive sign, says Todd Schlanger, senior investment strategist for Vanguard Investments Canada Inc., in a release. “This is in contrast to the typical pattern we have seen in similar periods of strong stock market returns. This may be reflective of increased investment discipline and prudent rebalancing strategies on the part of investors.”

The one-month risk speedometer reading fell significantly to below average for September compared to August, with slightly below-average investor risk appetite for the third quarter of the year.

Year over year, the risk speedometer is moderately above average, although the recent trend is for less risk.

“With risk appetite at average or lower levels, we appear to be seeing a trend toward broad-based asset allocators rather than fund selectors in the Canadian market,” says Fran Kinniry, principal in Vanguard’s Investment Strategy Group, in a release. “If true, we see this as a very positive development for investor outcomes and advisory practices.”

Read: Why foreign equity funds gained in October

Adds Schlanger: “Canadian investors have been embracing the benefits of global diversification and reducing their positions in more niche or specialty investment products. Accordingly, global bonds were a popular choice for investors along with global equities, as investors seek to strike a balance, lower their investing costs and mitigate risk.”

Read Vanguard’s full report, which includes net inflows and outflows for various assets.

About the Vanguard risk speedometer: The measure aims to provide a factual representation of how investor risk appetite is trending, relative to the past. The index calculates cumulative net cash flows into high-risk and low-risk asset categories (Canadian mutual funds and ETFs) as a percentage of total assets under management, relative to historical data.

Also read:

When to keep and let go of investments

ETFs versus mutual funds: which win?

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The staff of have been covering news for financial advisors since 1998.