Figures from OSC shed light on investors' buying, selling, and holding behaviours
There are two general rules of thumb for the average stock investor to follow: hold on for the long haul, and hold tight during times of turbulence. And judging by a recent report put out by the Ontario Securities Commission, just over half of Canadian investors adhered to the second tenet.
In “Investing and the COVID-19 Pandemic”, which draws from an online survey of 2,000 Canadian investors conducted from September to October 2020, the OSC said 52% of respondents chose neither to buy nor sell during the pandemic, putting them in the bucket of “passive investors.”
The remaining 48% of respondents, who could be classified as “active investors,” bought or sold investments during the period. By and large, they were more likely to be male, younger, have a higher household income, and have a child in their household.
Drilling deeper into the active cohort, a segment representing 22% of all Canadian investors said they were forced to sell at least some of their investments during the pandemic. Motivations cited include paying for expenses, defence-based selling (to curb losses or to pivot to lower-return/lower-risk products), and “proactive” selling (to crystallize market profits or invest in higher-return/higher-risk products).
The other segment of active investors – those who bought during the pandemic – equated to 40% of all respondents. A majority of that segment said they bought 20% or less of their current investment holdings during this period; notably, most of those who bought indicated that they were doing so in reaction to the market, as opposed to just following their regular contribution patterns (30%). Overall, a tenth of all respondents in the survey say they saw and seized a buying opportunity from undervalued assets in the market.
Dividing the active investors further, the OSC found there were more than twice as many “net buyers” as “net sellers” (30% of all respondents vs. 12% of all respondents, respectively); another 5% of all investors were “net zero investors” who bought and sold in similar proportions.
Predictably, net buyers on the whole had a more positive assessment of the current situation, as they were more likely to assess their current financial situation as better compared to September 2019. In contrast, net sellers appeared to fare worse during the pandemic; they were more likely to say they were facing unexpected expenses brought on by the pandemic, see their financial situation as worse compared to September 2019, and be worried about their ability to keep up with monthly expenses.
But perhaps counterintuitively, just 9% of net buyers said they adopted a riskier investing mindset during the pandemic. Nearly half (45%) said they were either “very conservative” or “conservative” in their investment decision-making during the pandemic.
Overall, nearly eight tenths (78%) of Canadian investors in the OSC survey said they had not sold any investments during the pandemic. Compared to men, women were more likely to say that they haven’t sold any investments (82% for women vs. 74% for men); the likelihood of not selling also seemed to increase with age (67% among 18- to 34-year-olds, 78% among 35- to 54-year-olds, and 82% among those 55 and above).
Over one in 10 of all investors (14%) said they’ve sold 20% of their total investments at most, while 8% said they’ve sold more than 20%.