Young Canadian investors are more likely than older generations to tweak their portfolios in the face of geopolitical events, and those who invest in ETFs are even more likely to opt for this active management approach, a recent study found.
The survey was conducted by market research firm Sago on behalf of the Canadian ETF Association (CETFA) this March, when heightened geopolitical tensions roiled global markets.
The survey of roughly 4,600 Canadians found that many investors chose to keep calm and carry on with their investment plans, despite rising uncertainty. Specifically, half of Canadians surveyed said the conflict in the Middle East didn’t affect their investment plans.
However, among Canadians aged 18–34, 13% said they’d already made changes to their investments amid the geopolitical uncertainty arising from the conflict in the Middle East, compared to just 4% of those aged 55 and above. As well, 17% of those in the younger cohort said they planned to review their portfolios.
ETF investors were found to be even more responsive to evolving geopolitical conditions. About 15% of Canadians who owned ETFs at the time of the survey said they planned to adjust their investment plans in response to global events.
Investors were also asked how they felt about using ETFs as tools to navigate volatility. About 10% of Canadians said they were more likely to increase their investments in ETFs during volatile periods, and 32% said they wouldn’t make any changes to their portfolios. Among existing ETF investors, 23% said they’re more likely to buy ETFs during periods of volatility.
Another key finding from the study was that roughly one in five (21%) Canadians reported owning both Canadian- and U.S.-listed ETFs. However, 65% of survey participants said they weren’t aware that ETFs offered on different sides of the Canada-U.S. border are subject to different tax treatments.
Even among ETF investors, there was limited awareness of cross-border tax implications. About 36% of people who invested in ETFs at the time of the survey said they were unaware of these tax differences, while 45% of investors who specifically owned U.S.-listed ETFs reported being unaware.
To that end, Eli Yufest, the executive director of CETFA, stressed that the industry needs to do a better job of closing this knowledge gap.
“Improving investor awareness around tax treatment and market structure is essential to ensuring Canadians can make fully informed investment decisions,” he said in a release.
The study was based on a national survey of 4,608 Canadians across different age groups, regions, education levels and income brackets. It was conducted by the SAGO Canadian Panel between March 1 and 31. Its results were weighted to reflect Canadian census demographics to ensure findings were representative of the broader population.
A sample of this size has a margin of error of approximately plus of minus 1.4 percentage points, 19 times out of 20.