Canadians looking to earn income from investments are unhappy with their portfolio returns but are too afraid to change their strategy, suggests a recent poll by Toronto-based CIBC.
According to the poll released Tuesday, 42% of people who listed income generation as their primary investment objective are not satisfied with their current returns. However, 54% of those same investors are not considering switching from low-yielding products. Of that group, 52% say they will not switch investment strategies because of the perceived risk.
In many ways, people remain wary of riskier investment strategies because of persistent bad news, however, that fear may be unwarranted.
“There are people thinking we could have a replay of 2008,” says Pat O’Toole, vice president, CIBC Asset Management in Toronto. However, since that time when everyone looked like “a deer stuck in the headlights,” says O’Toole, central banks and governments have made changes to ensure liquidity and to provide confidence in the system. As such, there is a slow recovery going on, which has created a positive environment where companies can do well.
Advisors with clients still sitting on the investment sidelines with cash in money markets need to remind them about the advantages of diversification, according to O’Toole. “People became disillusioned with [diversification], I guess,” he says, “[because] during the financial crisis everything performed poorly for a while but diversification is a sound long-term strategy.”
Even for clients who want to keep their investments in fixed-income can still diversify. For example, CIBC sees potential in pure corporate bond funds, says O’Toole. “We’ve seen good interest in that type of product the last couple of years,” he says, “[and] we think they’re going to continue to be attractive for investors going forward.”
The survey results are based on an online poll conducted by Leger Marketing from Dec. 21, 2012 to Jan. 4, 2013 of 1,541 English and French-speaking Canadians with an investment portfolio for retirement.