Even before the crash in oil prices and the subsequent swoon by the Canadian dollar, Canadian investors held far more conservative views about investing and portfolio mix than Americans do, according to a recent survey by Toronto-based Manulife Financial Corp.

More than a third of the 1,000 Canadians surveyed said it makes sense to hold cash as an investment, an attitude that is in sharp contrast to that of U.S. investors, who generally shun cash and believe stocks are the way to go. This conclusion is one of the key takeaways from the semi-annual Manulife Investor Sentiment Index survey, which gauges investors’ views about and confidence in various asset classes, as well as in savings and investment vehicles.

Canadians have displayed more conservative tendencies than their southern neighbours for several Manulife surveys now. Canadians place their faith in owning their homes as the single best investment, while Americans favour the stock market, says Megan Greene, managing director and chief economist with Manulife Asset Management Ltd. in Boston.

Greene chalks up some of this difference to the housing crash in the U.S., which Canada skirted, and the lifting effect on U.S. equities by quantitative easing.

“It has been more obvious for the U.S.,” Greene says, “with the [Federal Reserve Board] just pumping liquidity in the system that the equities markets would be buoyed by that.”

The survey found that Canadians’ affinity for cash runs across the income spectrum: about one-third of Canadians surveyed in both the affluent (34%) and general population (37%) segments view cash as a good investment. But just 13% of U.S. investors view cash as the best asset class.

The survey was conducted in late November 2014. It found that Canadians were getting out of the equities market and saving cash; the survey calls cash “a non-traditional investment product.”

The downside of Canadians’ conservatism, as is evidenced by their preference for cash and fixed-income investments (35% of Canadian survey participants view bonds as a good asset class), is that those investments provide meagre returns in today’s low interest rate and low inflation environment.

“To get the returns investors are looking for, it’s going to be really tough in fixed-income, given that we live in this age of oversupply,” Greene says. “We are unlikely to see anything but low growth, low inflation and low interest rates for at least the next five years.”

Investors piling back into fixed-income during periods of stock market volatility is understandable, “even more the case in Canada than the U.S.,” Greene says. “But I think that a lot of the big, global macroeconomic trends we are seeing are pretty supportive of equities over fixed-income.”

Greene’s advice to investors and their financial advisors: “Resist the urge to get back into what is perceived as a safer investment if you are looking for returns.”

Even if the Fed finally makes good on its promises to raise interest rates this year, that does not mean that other countries will follow suit, she adds: “Every other central bank is easing further, so there’s a ton of liquidity in the global system. And that will keep interest rates down for a really long time.”

When Canadians were polled about their top investment priorities over the next year, they put their homes first (24%), followed by cash (23%), tax-free savings accounts (18%) and RRSPs (16%).

So, why is cash king? The poll found that 20% of Canadian survey participants like that cash is “readily available,” while 19% said it was easy or the only affordable investment choice; another 11% said cash was a risk-free investment.

Tom Hamza, president of the Investor Education Fund in Toronto, views the diverging investor outlooks as a reflection of how the U.S. and Canadian economies have fared since the global financial crisis: “We have been riding high. We are not accustomed to riding so high compared with the U.S. for so long. There’s a caution as we are seeing the U.S. starting to come back. Americans are typically less conservative in their investments and are perhaps starting to move much more into the markets despite their fragility.

“In Canada,” he adds, “we are looking more at a natural resources-based economy, in which a lot of natural resources investments are question marks.”

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