Canadian investors ready for risk

Canadian investors are piling money into stock markets as they take on more risk and shed fear on optimism about the global economic recovery.

Investment manager Franklin Templeton Investments Corp. says investors are gradually warming up to equities in a move that it characterizes as a "thawing out from a four-year freeze."

Franklin Templeton found that 14 per cent of investors surveyed said they were “risk-takers,” up from the 8 per cent level that has held relatively steady over the past four years.

"Risk taking really means more people who are willing to shift a larger amount of their portfolio to equities," said Don Reed, Franklin's president and chief executive.

Investor sentiment is "risk-on" and the thinking is "I'll take the risk and probably get the reward," he added.

"When a negative piece of news comes out today it may startle the market a little bit, but then it's back on its move forward. Whereas, just two years the least negative item had everybody in a tizzy," said Reed.

More men identify themselves as opportunistic, risk-taking or analytical at 47 per cent than women at 35 per cent, according to the survey.

On a regional basis, investors in Alberta are the biggest risk-takers at 20 per cent, while people in Ontario and Quebec are more risk-averse at 13 per cent.

'Sea change in thinking'

U.S. stocks rose to five-year highs on Friday, with the Dow closing above 14,000 for the first time since October 2007, while the benchmark Standard & Poor’s 500 rallied 5 per cent in January to notch its best start of the year since 1997, according to Reuters.

Canada's S&P/TSX composite index also logged gains on the back of encouraging U.S. jobs data.

In January, a survey of sentiment by the American Association of Individual Investors hit its most bullish level in roughly a year.

The economy is showing gradual growth, interest rates are very low and trouble spots such as the U.S. fiscal talks and the euro zone debt problems appear to be contained, market observers say.

Robert Gorman, chief portfolio strategist at TD Wealth, said billions moved into U.S. equity funds from bonds in January.

"That represents quite a turn from past experience over the past four years," said Gorman, adding that during the financial crisis money had flowed the other way to the relative safety of bonds.

As well, quarterly results are generally giving investors reason to be optimistic, said Thomas Caldwell, chairman of Caldwell Securities.

"People are saying why would I own, say a bond, that is giving me two per cent when I can own a stock that gives me a three or four per cent dividend yield, and maybe five or six or eight per cent growth on top of that," said Caldwell.

"There's definitely been a sea change in thinking."

Sternlich: Why I'm Worried About the Stock RallyStarwood Capital Group CEO Barry Sternlicht explains why he's worried the current "nirvana" for investors could evaporate.

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