TORONTO — As the economy treads toward a slow recovery, a growing number of investors are holding their savings in relatively conservative registered investments, while others forgo saving to pay down debt incurred during the downturn.
In a Scotiabank survey released Monday, about 55 per cent of respondents said they had a neutral view on the economy, meaning they weren’t sure whether it would fare better or worse following a volatile 2009.
ScotiaMcLeod wealth adviser Andrew Pyle says investors are more optimistic about the economy than they were a year ago, but remain uncertain about the direction the economy will take.
“They’re going to be on the fence because they’ve seen both extremes (recession and recovery) in a very short period of time,” Pyle said.
“It’s not a surprise to me to see these kind of results, nor is it a surprise to see more Canadians adopt a slightly more conservative view to their own investments, given that they are not convinced either way about which way the economy is going to go.”
Two-in-five investors surveyed, or about 40 per cent, said they are holding all of their savings in a registered plan, compared with 29 per cent of respondents surveyed last year.
Scotiabank attributed the increase to a 14 per cent decrease in investors who use both registered plans and non-registered savings.
About 37 per cent of those surveyed said they are paying more attention to their investments because of economic uncertainty.
“People will tend to be a little bit more conservative; they won’t be willing to bet the farm on the stock market to get back the money (the lost),” Pyle said. “They’ll just look at saving more, but have that savings invested in a more conservative environment.”
Pyle added that many Canadians are taking advantage of the tax benefits of registered accounts, including RRSPs, and tax-free savings accounts, to help restore their nest eggs.
“When you feel (unsure) as an investor you typically would not be aggressive in your investing habits, you would tend to be still fairly conservative,” Pyle said.
“(Investors) would be looking for ways to rebuild from what we’ve just gone through in the last year.”
But some recession-strained Canadians might not have enough to make any long-term savings investments from 2009, said Adrian Mastracci, a portfolio manager at KCM Wealth Strategies.
“The remnants of (the recession) are still with us in many ways. That paycheque gets stretched quite a bit...we have a new situation this year that’s been brewing with the recession and people are probably still being a little cautious and rightly so.”
Mastracci said the question of whether to make any investment or forgo it is unique to each Canadian and is driven by personal events.
However, he said, investors who may be at risk of losing their job may benefit more from building an emergency savings fund, while those who have overdosed on loans and credit cards may see greater benefits from repaying debts.
The Scotiabank survey found that those who took money out of savings to pay off mortgages and other debts increased to 25 per cent from 19 per cent in 2008, when the top reason for taking out money was to pay for daily expenses.
Pyle also cited another encouraging trend in the 2009 survey: The number of investors who said they planned to retire before 65 increased to 49 per cent in 2009, compared with 43 per cent the previous year.
“When we went through the correction of 2008, a lot of Canadians feared that they may have to work past the age of 65 because their RSPs had taken such a hit,” he said.
“The fact that Canadians have come through this experience and still plan on retiring before 65 may be telling us they have adequate resources to do that.”