Playing it too safe may result in missing return targets Canadians say they need to retire
TORONTO, Feb. 13, 2015 /CNW/ - CIBC (TSX: CM) (NYSE: CM) - Nearly 80 per cent of Canadians believe they need annual returns of 4 per cent or higher from their portfolios to reach their retirement savings goals, finds a CIBC Asset Management poll conducted by Leger. Yet almost 70 per cent of investors who hold low-rate guaranteed products won't consider investing in the market for fear of losing their money.
"Fear is still affecting investment decisions and keeping Canadians from meeting their goal of at least a 4 per cent annual return," says Steve Fiorelli, Managing Director, CIBC Asset Management. "The disconnect between investors' return expectations and portfolio allocations could be a barrier to reaching retirement savings goals, especially as we see continued downward pressure on interest rates. While guaranteed investments offer a sense of security, it is a well-diversified portfolio that will deliver results for investors over the long-term."
Mr. Fiorelli says that it's not surprising to see fear creep back into investing decisions given the sharp increase in market volatility since oil prices collapsed, but he thinks it is important that investors remain focused on their overall long-term investment goals. Last year, even with the plunge in oil prices, Canada's major stock market returned 10.6 per cent, including dividends. Looking over the past decade, the S&P/TSX Composite Total Return Index posted an annualized return of 7.6 per cent.
"For investors very close to retirement or those with low risk tolerances, a guaranteed product is an option, but if you are looking over the mid-to-long term, history shows the markets do outperform," he says.
Key poll findings:
- 42 per cent of investors will likely invest primarily in low-rate, guaranteed products
- 78 per cent of those who know what they need in annual returns say they require 4 per cent or higher to reach their investment goals
- Of those not considering investing in potentially higher-returning investments, like a mix of stocks and bonds, 67 per cent cited fear of losing their capital or original amount invested as the main reason why
Additional key poll findings:
Reasons why Canadians aren't considering potentially higher-returning investments, like a mix of stocks and bonds:
|Afraid of losing my capital/original investment||67%|
|Not aware of their options||9%|
|Too near retirement||3%|
|Enough other investments||2%|
Looking to future investment plans, percentage of Canadians saying they will likely primarily invest in:
|Stocks, including mutual funds holding stocks||42%|
|GICs, savings accounts or other guaranteed investments||42%|
|Bonds, including mutual funds holding bonds||12%|
The results presented in this document were gathered through a Web survey conducted by Leger from November 21 to 25, 2014 among a representative sample of 1,505 English- or French-speaking Canadians, 18 years of age or older, who have an investment portfolio for retirement. Using data from Statistics Canada, the results were weighted according to gender, age, region, language spoken at home, education and whether or not children are present in the household to ensure a sample representative of the entire population under review. The margin of error—which measures sampling variability—is +/- 2.53%, 19 times out of 20.
About CIBC Asset Management
CIBC Asset Management (CAM), the asset management subsidiary of CIBC, provides a range of high-quality investment management services and solutions to retail and institutional investors. CAM's offerings include: a comprehensive platform of mutual funds, strategic managed portfolio solutions, discretionary investment management services for high-net-worth individuals, and institutional portfolio management. CAM is one of Canada's largest asset management firms, with over $100 billion in assets as of October 31, 2014.
SOURCE Canadian Imperial Bank of Commerce
Caroline Van Hasselt, Director, External Communications and Media Relations, 416-784-6699 or firstname.lastname@example.org