CANADIAN INVESTORS CAN BE a contradictory bunch. Although they’re upbeat about their own financial future over the next five years, they are pessimistic about Canada’s economy over that time span and generally have a conservative investment posture – with significant home-country bias.
Those are the results of Toronto-based Sun Life Global Investments (Canada) Inc.’s inaugural Investment Sentiment Report of 1,502 Canadians, which revealed investors’ outlooks do not always match the contents of their portfolios.
The survey found that only one-third of investors were optimistic about the growth of Canada’s economy over the next five years, but more than half of survey participants (52%) were optimistic about their own finances over the same time span.
Despite the made-in-Canada pessimism, survey participants are heavily invested in the domestic economy. On average, they hold about 34% of their portfolios in Canadian stocks and mutual funds,13% in Canadian bonds and bond funds and 25% in cash. Just 12% is invested in foreign stocks, bonds and mutual funds.
Surprisingly, few survey participants thought a heavy bias to slow-growth, resources-heavy Canada is a bad thing. In fact, more than half (57%) said they wouldn’t increase their foreign content and 26% said they were not sure about doing so.
Among survey participants unwilling to add more foreign holdings to their portfolios, 39% preferred their investments to be in Canadian dollars, 32% said the global economy is weak, 20% said foreign investments are too risky,13% said researching global investments is too difficult and 10% said their advisors do not recommend those investments.
“[Those results] are pretty typical, and even stronger for people who hold individual stocks because they are buying Canadian, maybe some U.S. stocks. [These investors] really don’t have much exposure to the world outside of Canada,” says Dan Hallett, vice president and principal of HighView Financial Group of Oakville, Ont. “The idea that they should have some global diversification makes sense, and a lot of people don’t have enough of that.”
Hallett’s advice to advisors dealing with clients’ home-country bias is to standardize an approach to incorporate more foreign holdings in client accounts.
“For more conservative clients, you might have a heavier content percentage of the portfolio,” he says. “But as you look at more aggressive risk profiles, maybe a greater proportion of the assets end up in more global [firms].”
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