Industry News

IEF survey examines investment decision making

By IE Staff |

A new national survey conducted for the Investor Education Fund reveals how Canadians handle — or don't handle — risk, emotion, financial loss and decision-making when it comes to their investments.

The Canadian Money State of Mind Risk Survey 2014 examines behavioural and attitude differences among demographic segments based on gender, household income, age grouping and region, and also differentiates optimists from pessimists and high-risk from low-risk investors.

The study highlights a disconnect between investors and the products they own. For example, almost one-quarter of individuals who identify themselves as low-risk investors own "medium- to very high-risk" products; conversely, seven in 10 self-identified high-risk investors own "low- to medium-risk" products.

The study notes the two dominant patterns of response to a major investment loss (at least 20 per cent of their investment value): stay the course (51 per cent) or flee to safety (36 per cent) either for a short time or permanently. 

The study also indicates that just over half of investors have regretted an investment decision based on emotion, although most have done so only once or twice.

"We want to stimulate Canadians to think about money, emotion and risk-taking – while raising their awareness of GetSmarterAboutMoney.ca as a source for getting unbiased investment knowledge and making better decisions," says Tom Hamza, IEF president.

The IEF has created an interactive infographic to help investors understand their risk level and make better investment decisions. The online tool asks users to answer select survey questions about their investment behaviour and beliefs, and compares their answers to fellow Canadians.

Hamza notes the study could also prove to be of value to financial advisors as it reveals why some investors may take excess risk, while others retreat from potential rewards. It also highlights the low priority Canadians place on having personal investment knowledge and pinpoints the top investing concerns for the next two years.

The survey was conducted by The Brondesbury Group via the Internet in English and French in September 2013, with responses from 2,002 people. The survey's overall accuracy is plus or minus 2%, 19 times out of 20.

Eligible respondents had to have at least one of eight types of investments to participate. Some quotas were imposed to ensure an appropriate mix of age and gender. Regional quotas were also used to improve accuracy by region.