Slow economic recovery is influencing Canadian investor behaviour in a number of ways, according to a recent Bank of Nova Scotia study assessing Canadian investors’ attitudes toward investing.

More than half of those surveyed (55%) have a neutral view on the economy, suggesting a high level of lingering uncertainty.

According to the study, two-in-five (41%) of investors surveyed are holding their investments entirely within a Registered Savings Plan, compared to 29% last year. This increase is largely driven by a corresponding 14% decrease in investors who hold their investments in both registered and non-registered savings.

“Considering the sharp portfolio losses many Canadians experienced in 2008-09, it’s not surprising to see a shift towards registered investments such as RRSPs and TFSAs,” said Andrew Pyle, wealth advisor, ScotiaMcLeod. “To help restore their nest eggs, many investors are opting to take advantage of the tax benefits offered by registered plans.”

The study also found that mutual funds remain the most widely held investment vehicle by Canadian investors (54%), even after an 11% decrease in popularity since last year. Savings accounts, on the other hand, have increased in popularity by 6%, making them a close second (50%) to mutual funds.

“The movement towards savings accounts is a trend that began surfacing last year as Canadian investors have become more conservative in their risk tolerance, and are perhaps waiting for an opportune time to lock in their money,” said Pyle.

With the recent financial market turmoil fresh in their minds Canadian investors continue to keep a close eye on their investments. Thirty-seven per cent of those surveyed indicate that they are paying more attention to their investments as a result of the current economy.

While the proportion of Canadian investors who have taken money out of their investments to pay for something other than what they’re saving for has only increased slightly in the past year (41% in 2009 vs. 37% in 2008), their reasons for doing so have shifted. Those paying off a mortgage and other debts increased to 25%, up from 19% the previous year. In 2008, the top reason for taking money out was to pay for day-to-day living expenses (24% in 2009 vs. 29% in 2008). Buying a new home remains third.

Interestingly, despite economic uncertainty and investment losses, the percentage of investors who say they plan to retire before age 65 actually increased in 2009 to 49% from 43% the previous year.

IE