Canadian Investors Confident in Their Investments Yet Cautious in Their Investment Strategies

Surprisingly, Canadian investors are more cautious and less confident than Americans, according to Franklin Templeton Global Investor Sentiment Survey

TORONTO, April 24, 2013 /CNW/ - Canadian investors are optimistic about the market and their ability to meet their financial goals, but a majority believes 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 per cent of investors believe their domestic stock market will rise in value this year as do 65 per cent of Americans. An overwhelming majority (81 per cent) of investors in both countries expressed optimism about reaching their financial goals; yet by comparison, only 69 per cent of European investors share the same optimism.

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 per cent) who will get more aggressive. U.S. investors are more evenly divided, with 39 per cent indicating they will invest more conservatively and 31 per cent 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," said Ronice Barlow, head of Strategic Planning & Business Development - Canada for Franklin Templeton Investments Corp.

The 2013 Franklin Templeton Global Investor Sentiment 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.

Americans See Stocks as Essential to Investment Goals; 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 per cent 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 per cent) believe they can meet their investment goals without investing in the equity markets.

This compares to almost two-thirds (64 per cent) of European investors and 70 per cent 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 per cent of Canadian investors cited the state of the global economy and another 39 per cent identified low interest rates as their reasons for caution. South of the border, 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, 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."

Younger Canadians More Conservative and Global-Minded

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 per cent) 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 per cent) to expect stocks to outperform other asset classes this year and more likely (59 per cent) 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 per cent) of their assets at home this year.

Home Country Bias Prevalent Among North Americans

Canadian and U.S. investors have more confidence in their domestic markets than in either developed or emerging markets. Canadians allocated 71 per cent of their investments to their home markets and Americans allocated 78 per cent of their investments domestically last year, the highest levels of domestic investment in any surveyed region.

In the next decade, the largest portion of Canadian investors (36 per cent) and almost half (49 per cent) of U.S. investors believe they will find the best equity opportunities in their own countries. That said, 30 per cent of Canadians and 28 per cent of Americans believe Asia will produce the best equity opportunities over the next decade.

Varying Perceptions of Recent Market Performance

Canadians' relative conservatism may be tied to perceptions of recent market performance. Less than half (48 per cent) of Canadian investors correctly believe that the stock market increased in value in 2012, compared to more than two-thirds (69 per cent) of Americans.

"Clearly, the market volatility over the past five years has reinforced a preference among investors for capital retention over investment gains. As seen in recent years, this risk avoidance has led many investors to remain on the sidelines, missing opportunities," said Greg Johnson, president and chief executive officer of Franklin Templeton Investments. "Working with a financial advisor can be the best resource for evaluating all sides of the risk equation."

Methodology

The Franklin Templeton Global Investor Sentiment Survey, conducted by ORC International, included responses from 9,518 individuals in 19 countries: Brazil, Chile and Mexico in Latin America; Australia, China, Hong Kong, India, Japan, Malaysia, South Korea and Singapore in Asia; France, Germany, Italy, Poland, Spain and the U.K. in Europe, and the U.S. and Canada in North America. Survey respondents were between the ages of 25 and 65 in Latin America and Asia and 25 and older in Europe and North America. Respondents were required to own investable assets, such as stocks, bonds, mutual funds, etc. In addition, a minimum investable asset threshold was set for each country to ensure that the respondent had sufficient investments, which would provide a knowledge base to answer the survey questions. Surveys were completed from January 14 to 25, 2013 in all countries.

About Franklin Templeton Investments

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. Franklin Templeton Investments provides global and domestic investment management solutions managed by its Franklin, Templeton, Mutual Series, Bissett, Fiduciary Trust, Darby, Balanced Equity Management and K2 investment teams. The San Mateo, CA-based company has more than 65 years of investment experience and over US$823 billion (over C$$836 billion) in assets under management as of March 31, 2013.

For more information, please visit franklintempleton.ca or connect with Franklin Templeton on Twitter (@FTI_Global). Read the Beyond Bulls & Bears blog featuring perspectives from Franklin Templeton's investment professionals around the world and the Investment Adventures in Emerging Markets blog from Mark Mobius (@MarkMobius), executive chairman of Templeton Emerging Markets Group.

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SOURCE: Franklin Templeton Investments Corp.

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