Slow and steady will win the race for Canadian investors, BMO says
What do investors and Canada's Olympic athletes have in common? According to BMO InvestorLine, both are focused on long-term goals.
BMO's latest results of a study of investor habits finds the "slow and steady" approach is largely favoured in the investing race for the majority of investors with more than half (53 per cent) see themselves as the investing equivalent of a marathon runner.
Thirty-four per cent hold some short-term and some long-term investments. Only 12 per cent consider their investing style similar to that of a sprinter athlete. For these individuals, it is all about getting in and out of the markets quickly.
"These results confirm a lot of what our hypothesis were in terms of the types of clients that we have," says Cesar Rainusso, vice-president, BMO InvestorLine in Toronto. "If you're a long-term investors, you've got to plan, be steady, monitor your portfolio, make appropriate changes but understand that longer term strategy.
"What's encouraging is, Canadians are upbeat about the market improving in the next four years and that they'll perform better than they have in the last four years."
When it comes to their investing style, nearly 60 per cent of investors say "a sense of balance" is critical for them when managing risk and return. Thirty-one per cent describe their investing style as conservative. Only 10 per cent identify with a more aggressive stance on investing.
"There's a small percentage of investors that are very active in the market. Those are the people that are seeking returns … but the results overall are consistent with what we've seen: a big part of our investors are looking longer term," he says. "We always tell our clients, don't overreact to the market. When it comes to general guidance, you've got to plan and stick with your strategy. You need to make portfolio adjustments, but don't overreact if there's a piece of news that comes out and you want to suddenly sell everything … maintain a level of caution but stay on course."
The study also found that the majority of Canadians are upbeat when it comes to how they expect their investments to perform over the next four years. The majority (57 per cent) believes their portfolios will perform better in the next four years than in the last four-year period. Only five per cent believe their investments returns to be poor.
Caution appears to be the order of the day for some Canadian investors. A recent Manulife Financial survey on the subject finds Canadian investor enthusiasm has decreased across almost all investment vehicles in the first half of 2012.
Meanwhile, an unrelated BMO Harris Private Banking study released in early July finds Canadians rather bullish on Canuck investment opportunities.
Rainusso says there exists an element of caution among Canadian investors but he adds it's a 'positive caution'.
"People recognize they still need to be careful and manage their portfolios well but they also expect to see things improve," he says. "Almost 60 per cent of the respondents in this study likened themselves to a gymnast because you need that sense of balance to your portfolio."