A version of this article originally appeared on our sister publication, Advisor.ca.
Canadian investors are optimistic about the market and their ability to meet their financial goals, but a majority of investors believe they can achieve their investment goals without holding stocks, according to Franklin Templeton’s 2013 Global Investor Sentiment Survey.
The study finds that 60% of Canadian participants and 65% of American investors share a sense of optimism about the markets. An overwhelming majority (81%) in both countries are confident about reaching their financial goals, while only 69% of European investors feel the same.
“Investors often let emotions impact their investment decisions,” says Ronice Barlow, head of strategic planning and business development – Canada with Franklin Templeton Investments. “Even though the markets are up and Canadians think they will continue to rise, they’re concerned about investing in equities.”
The survey also reveals that Canadian investors’ confident outlook doesn’t translate into confident investing. Half of them indicated that they will be adopting a more conservative investment strategy in 2013, compared with 22% who will get more aggressive. By contrast, U.S. investors are more evenly divided, with 39% indicating they will invest more conservatively and 31% planning to invest more aggressively.
The dramatic market drop in 2008 continues to stand out in their minds, causing them to be more conservative and pass up growth opportunities in the equity markets that could help them more effectively achieve their long-term goals, he adds.
A key finding of the survey is that U.S. investors show a far greater reliance on stocks to meet their investment goals compared to most other countries, including Canada.
Only 37% of U.S. investors, compared with 56% of Canadian respondents, say that they can reach their goals without investing in stocks, the lowest percentage of any region surveyed.
This compares with 64% of European and 70% of Latin American investors who won’t rely on equities, focusing instead on precious metals and real estate.
The survey finds that younger investors (25 to 34 years old) are most conservative and have a smaller allocation to stocks, a notable divergence from older counterparts.
More than two-thirds (68%) of younger Canadian investors do not see stocks as essential to meeting their long-term investment goals, the highest percentage among all age groups. Yet they show a greater willingness to invest abroad, planning to invest only 64% of their assets at home this year.
Investors in North America show a greater level of home bias compared to other developed countries and emerging economies, notes the study. Canadians allocated 71% of their investments to their home markets, while Americans allocated 78% of their funds domestically last year, the highest levels in any surveyed region.