When it comes to investing, Canadians can be a cautious bunch. While holding a negative outlook on the Canadian economy, they continue to have conservative investments with a focus on their home market.
The first edition of the Investor Sentiment Report — based on a poll of 1,502 Canadians with a minimum of $25,000 in investable assets — shows respondents are somewhat downbeat about the national economy. Close to 70% hold a neutral to negative view of the Canadian economy over the next 5 years. Investors take a more positive view when asked about their personal finances over the next 5 years. More than half (52%) are either very optimistic or somewhat optimistic (38%) about their financial future.
There are few regional differences in the 5-year outlook results. 4 in 10 (42%) Atlantic Canadians are somewhat pessimistic about the next 5 years. That’s greater than Quebec (32%), Alberta (33%) and a combined sample from Manitoba and Saskatchewan (30%). 9% of the Manitoba/Saskatchewan group say they’re very pessimistic.
Investors take a more positive view when asked about their personal finances over the next 5 years. More than half (52%) are either very optimistic (14%) or somewhat optimistic (38%) about their financial future. About one-quarter (26%) take a neutral view, 18% are somewhat pessimistic and 4% are very pessimistic.
Investment portfolios at odds with sentiment
Canadians were asked what was under the hood of their portfolios — both in personal savings and employer-sponsored retirement plans. While it’s important to keep in mind that individual allocations reflect an investor’s personal situation, a few numbers jumped out. Canadians reported they held an average of 25% of their portfolios in cash. The rest of the average allocations included:
- 34% Canadian stocks and stock mutual funds
- 13% Canadian bonds and bond mutual funds
- 12% foreign stocks, bonds and mutual funds
- 5% exchange traded funds
- 11% other
While higher cash reserves certainly may be a hangover from the financial crisis, it’s worth revisiting with your clients to determine if such a high allocation makes sense for their circumstances.
Taking on global exposure
It may be wise to help clients understand the benefits of looking beyond Canada. More than half (57%) of those polled said they didn’t plan to invest more in foreign assets next year, and 26% either didn’t know or weren’t sure.
Of those who do not plan to add foreign investments, 39% of respondents said it’s because they prefer their investments to be in Canadian dollars. One-third (32%) say the global economy is weak, 20% say foreign investments are too risky, 13% say it’s too difficult to research global investment opportunities and 10% said their financial advisor does not recommend them.
While diversifying beyond Canada is a well-told story, investors seem to need guidance to avoid a tendency to invest heavily at home. Your input and advice can go a long way to helping clients build a diversified retirement plan in line with their risk tolerance and time horizon.
The 2015 Investor Sentiment Report is based on the findings of an Ipsos Reid poll conducted between July 20 and August 8, 2015. A sample of 1,502 Canadians from 25 to 80 years of age from the Ipsos Canadian panel was interviewed online.
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