Canadian investors optimistic but plan to play it safe

Canadian investors appear to be releasing their white-knuckle grip on their portfolios, believing better days are ahead in the markets. Still, many don’t plan to do anything too risky and believe property will continue to be one of the best investments over the next decade.

These are some of the key findings from a new survey from Franklin Templeton Investments, which has a more optimistic tone that some of the reports released during RRSP season.

It could be because the survey was done in January, when investors were still smiling at their huge returns from the market surge in 2013.

Franklin Templeton's 2014 Global Investor Sentiment Survey says 65 per cent of Canadians expect the stock market to rise this year – most of them are retirement age and older.

And despite the doom and gloom reported during RRSP season, when some surveys showed not enough people felt they were ready for retirement, this one says 81 per cent of Canadians feel they’re on track to meet their personal finance goals.

“Canadian investors expect higher returns from their investments this year than they did last year, and even higher average returns looking out over the next 10 years,” says the Franklin Templeton survey, which included 502 Canadian respondents.

“However, they continue to cling to conservative investment strategies, though to a lesser degree than last year.”

The survey shows 44 per cent of Canadian investors plan to be more conservative with their investments this year. That compares to 22 per cent planning to be more aggressive. The rest said they’ll stick to the same strategy.

Some market watchers warn against getting too risky in today’s markets.

“We think investors should pull back on risk when enthusiasm is running high and the market's valuation is relatively rich,” Lauren Adams, Morningstar’s director of cross-sector equity research said in a note about Canadian stock investing.

“Applying Warren Buffett's ‘be fearful when others are greedy and greedy when others are fearful’ mantra, we think the pendulum is swinging closer to the side of greed at the moment,” she wrote. "At Morningstar, we don't claim to know whether the market is going up, down or sideways in the short term. Instead, we continue to recommend investors look for truly great businesses equipped to withstand such uncertainty over the long run.”

Where Canadians will put their money

According to the Franklin Templeton survey, Canadians believe stocks, property and commodities, with the exception of metals, will be the top performing asset classes over the next 10 years.

The results show 62 per cent expect stocks to be top performing investments in 2014, followed by property at 47 per cent (what housing bubble?) and non-metal commodities (think oil and gas) at 43 per cent. That compares to last year when 55 per cent thought stocks and precious metals would be good investments.

As it turned out, the S&P TSX Composite Index underperformed the U.S. markets last year, due largely to the concentration of mining companies that have been hammered by falling metal prices and a lack of confidence in the sector.

That said, the TSX is outpacing both the S&P 500 and the Dow Jones so far in 2014, at least as of early April.

The Franklin Templeton survey shows Canadian investors believe the best opportunities for equity and fixed income returns will be at home.

“Reiterating their home country bias, when given the choice of several asset classes, Canadian investors are most likely to say that they will add or increase investments in equities in their country, with over one-fourth of Canadian investors expecting to add to or increase their investments in domestic equities in 2014,” the report says.