Nearly 80% of Canadians believe they require annual returns of 4% or higher from their portfolios to reach their retirement savings goals, according to a poll conducted for the asset management subsidiary of Toronto-based CIBC (TSX: CM).
However, 67% choose not to invest in products with potentially higher returns, such as stocks, for fear of losing money.
“The disconnect between investors’ return expectations and portfolio allocations could be a barrier to reaching retirement savings goals, especially as we see continued downward pressure on interest rates,” says Steve Fiorelli, managing director of CIBC Asset Management.
While 42% of Canadians state they will likely invest in stocks and mutual funds holding stocks, the same number of investors will likely stick with guaranteed investment certificates (GIC), savings accounts and other guaranteed investments. Bonds and mutual funds holding bonds are the likely investment choice for 12% of investors while 5% see themselves investing in exchange-traded funds.
The poll also showed a distinct difference between how men and women plan to invest their money. Recent market volatility is motivating 65% of women and 47% of men to take a more conservative approach to investing. Only 35% of women are planning to invest primarily in stocks, compared to 52% of men who say the same thing.
It’s not surprising to see fear creep into investing decisions given the sharp increase in market volatility since the collapse of oil prices but investors need to remain focused on their overall long-term investment goals. They should also consider that Canada’s major stock market returned 10.6%, including dividends, in 2014 in spite of the plunge in oil prices and that the S&P/TSX composite total return index has posted an annualized return of 7.6% over the past decade, according to Fiorelli.
“For investors very close to retirement or those with low risk tolerances, a guaranteed product is an option, but if you are looking over the mid-to-long term, history shows the markets do outperform,” he says.
The poll’s results were gathered from a representative sample 1,505 adult Canadians holding investment portfolios for retirement, using an online survey conducted by Leger between Nov. 21-25, 2014. The margin of error is plus or minus 2.53%, 19 times out of 20.