A recent BlackRock survey of Canadian investors and financial advisors has revealed some interesting findings that we thought were worth sharing. The questions focused on retirement issues, investor sentiment, areas of risk, and Canadians tendency for home bias. The findings highlight some interesting disconnects between what investors believe they should do with their money, and what they actually do with their money. For example, Canadians feel they should on average have 30% of their savings/investments in cash, however in reality they have 60% in cash. Investors seem to know that inflation eats away at their savings, but putting that knowledge into practice is proving to be difficult. This is reinforced by the finding that 28% would identify themselves as “investors,” whereas a substantial 72% would identify themselves as “savers.”
Canadians are slightly optimistic when describing the outlook for the investment environment, at 53% holding a positive view. However, 50% are concerned with the state of the Canadian economy, and a further 67% are worried about the high cost of living. Other common risks reported include running out of money in retirement, taxes, inflation, and healthcare costs.
One notable stat, more than 3/4 of Canadians’ investments are invested domestically in Canada, despite the fact that Canada only makes up about ~5% of the global economy. Home bias is nothing unique to Canada, every country experiences this, however it underscores a key risk to Canadian investors of improper diversification. Canada is heavily weighted in Financial and Resource industries, making it difficult to gain proper sector diversification when focusing on domestic equities. By looking abroad investors can gain access to a much wider range of opportunities, while also reducing their risk.
These surveys are always insightful, and they underscore some important facts facing Canadians. Many do not have a proper understanding of finance in order to reach their goals, or they do, but have difficulty executing on it. However, thanks to the digital age there is a wealth of easily accessible and free information available online. If you are feeling overwhelmed, make sure to check out both our Insight and Foresight libraries for extensive articles on a wide range of financial and tax related topics.