Personal Investor: Investor expectations out of whack with reality, survey finds
Canadians want high investment returns but they don’t want to take risks.
That glaring contradiction comes from a new survey of financial professionals from Natixis Investment Managers. Canadian investors surveyed say they expect a 9.1 per cent annual rate of return – far higher than the 5.7 per cent financial advisors think is realistic.
At the same time, 84 per cent say they prefer safety over performance.
One possible explanation for the broad misunderstanding of the basic risk/reward dynamics might be the finding that 60 per cent of respondents are unable to identify most of the underlying investments in the funds they own. That suggests they aren’t sure if their portfolios are properly diversified in certain sectors or geographic regions.
Based on those findings, Natixis identifies three areas of concern:
- Ten years after the global financial meltdown, most investors only understand risk in theory, but it’s only tested after they experience it. The survey found 29 per cent sold some or all of their assets immediately after the meltdown and 22 per cent later regretted the decision.
- The active versus passive investment decision is all about fees. Ninety-four per cent consider fees the most important determinant, giving less consideration for the value of professional investment management.
- Investors have trust issues. Despite the market gains since the meltdown, only 28 per cent of investors says the world is a more secure place, 45 per cent don’t trust the government and 44 per cent don’t trust the media.