Canadian investors are more cautious and less confident than Americans, according to Franklin Templeton Global Investor Sentiment Survey. But while they are more optimistic, they are less likely to invest in equities or more volatile securities, the survey found.
Canadian investors are optimistic about the market and their ability to meet their financial goals, but a majority believes they can achieve their those goals without holding stocks, according to Franklin Templeton’s 2013 Global Investor Sentiment Survey.
Canadian and American investors share a sense of optimism about the markets. In Canada, 60% of investors believe their domestic stock market will rise in value this year as do 65% of Americans. An overwhelming majority, 81% of investors in both countries, expressed optimism about reaching their financial goals; by comparison only 69% of European investors share the same optimism.
But Canadians’ confident outlook isn’t translating into risk taking. Half of Canadian investors indicated that they will be adopting a more conservative strategy in 2013, compared to 22% who planned to get more aggressive. US investors were more evenly divided, with 39% inclined to invest more conservatively and 31% to invest more aggressively.
“Investors often let emotions impact their investment decisions. Even though the markets are up and Canadians think they will continue to rise, they’re concerned about investing in equities. 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,” said Ronice Barlow, Canada head of strategic planning and business development Franklin Templeton Investments.
The survey polled more than 9,500 investors in 19 countries across Asia Pacific, Europe and the Americas on their current attitudes towards investing and their expectations for 2013 and the decade ahead.
US. investors indicated a far greater reliance on stocks to meet their investment goals compared to most other countries, including Canada. Only 37% of U.S. investors believe they can meet their long-term investment goals without investing in stocks, the lowest percentage of any region surveyed. Canadians have more confidence in their success without stocks, as 56% believe they can meet their investment goals without investing in the equity markets.
This compares to 64% of European and 70% of Latin American investors who believe that they can meet their investment goals without investing in stocks, focusing instead on precious metals and real estate.
When asked which factors are making them reluctant to invest in 2013, 40% of Canadian investors cited the state of the global economy and another 39% identified low interest rates. In the US, government fiscal policy and the state of the global economy were both cited as concerns by 44 per cent of Americans.
“Many investors need to rethink risk and focus on the long term,” said Wylie Tollette, Franklin Templeton director of performance analysis and investment risk. “Risk avoidance and risk management are two different things. Trying to avoid short-term risk and volatility entirely may expose investors to other kinds of risks, such as inflation and the impact of rising interest rates. These longer-term risks can negatively impact investors' ability to meet their financial goals.”
Younger Canadians are both more conservative and more global-minded The survey found that younger investors, those aged 25 to 34, are most conservative and have a smaller allocation to stocks, a notable divergence from older counterparts. Around 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.
Canadian investors aged 25-34 were also least likely, only 13%, to expect stocks to outperform other asset classes this year and 59% said they’d be more conservative when investing in 2013. However, younger Canadian investors show a greater willingness to invest abroad and were planning to invest only 64% of their assets at home this year.