Canadian investors are optimistic about the market and their ability to meet their financial goals, but a majority believe they can achieve their investment 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.
This confident outlook, however, is not yet translating into confident investing for Canadians. Half of Canadian investors indicated that they will be adopting a more conservative investment strategy in 2013, compared to less than one quarter (22%) who will get more aggressive.
U.S. investors are more evenly divided, with 39% indicating they will invest more conservatively and 31% planning 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,” says Ronice Barlow, head of strategic planning & business development – Canada for Franklin Templeton Investments Corp.
The 2013 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.
The survey suggests Americans see stocks as essential to investment goals, but Canadians do not. U.S. 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 over half (56%) believe they can meet their investment goals without investing in the equity markets.
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 as their reasons for caution.
Canadians’ relative conservatism may be tied to perceptions of recent market performance. Less than half (48%) of Canadian investors correctly believe that the stock market increased in value in 2012, compared to more than two-thirds (69%) of Americans.
“Many investors need to rethink risk and focus on the long term,” says Wylie Tollette, director of performance analysis and investment risk for Franklin Templeton Investments. “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.”
The survey found that younger investors (aged 25 to 34) are most conservative and have a smaller allocation to stocks, a notable divergence from older counterparts.
Over 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. Canadian investors aged 25 to 34 are also least likely (13%) to expect stocks to outperform other asset classes this year and more likely (59%) to be more conservative when investing in 2013.
Yet, younger Canadian investors show a greater willingness to invest abroad, planning to invest only two-thirds (64%) of their assets at home this year.
The study also found that home country bias is prevalent among North Americans investors.
Canadian and U.S. investors have more confidence in their domestic markets than in either developed or emerging markets. Canadians allocated 71% of their investments to their home markets and Americans allocated 78% of their investments domestically last year, the highest levels of domestic investment in any surveyed region.
Franklin Templeton Investments Corp. is a wholly owned subsidiary of Franklin Resources, Inc. (NYSE: BEN), a global investment management organization operating as Franklin Templeton Investments.