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Economic Uncertainty Reduces Investment Appetite Among Canadians

TORONTO, Sept. 7, 2023 – The ongoing economic upheavals of the last two years have significantly impacted Canadians’ investing habits. A recent survey has unveiled that 30% of Canadians have chosen to invest less, owing to these uncertainties. The challenges of inflation, coupled with escalating interest rates, have been primary factors behind this decision.

Interestingly, the objectives behind Canadians’ investment strategies vary with age. A majority of the respondents, at 55%, indicated that saving for retirement remained their chief investment goal. This was closely followed by the dual aims of generating income and building wealth, each garnering 43%.

For the younger Canadians, particularly those between 18-24 years, the emphasis shifts towards generating income and accumulating wealth. Meanwhile, their older counterparts, especially those in middle age and beyond, are more inclined towards bolstering their retirement savings.

The survey unearthed a distinct trend among the younger generation. A significant 50% of Canadians in the 18-24 age bracket believe that values-based investing holds immense importance. This trend, however, wanes as the age group rises, with only 34% of Canadians aged 45 and above echoing similar sentiments.

David O’Leary, a personal finance expert at WealthRocket, remarked, “Fear tends to override rational thinking.” He highlighted that many individuals either halt or liquidate their investments when confronted with uncertainties. “This reactionary behavior is counterproductive, especially if there’s no immediate need to sell,” he added.

O’Leary provided insights on this finding, stating, “Today, there’s a heightened awareness of the environmental, social, and governance impact of the companies we patronize.” He emphasized that this change in sentiment has resulted in a parallel shift in investing mindsets. “The modern investor is not just financially conscious but also socially responsible,” he observed.

The study, carried out online between August 15-16, 2023, encompassed 1,200 Canadian participants aged 18 and above. To ensure unbiased results, an equivalent number of respondents from each age group were surveyed. The estimated margin of error for the results is +/- 3%.

Investment Behavior Amid Economic Uncertainty

  1. Economic Backdrop: Canada has experienced economic instability due to the global pandemic, surging home prices, rising interest rates, and inflation.
  2. Impact on Investments: A survey reveals that 30% of Canadians are investing less because of economic uncertainty. Additionally, 10% stopped investing altogether.
  3. Age Group Analysis: Canadians aged 35-44 have been most impacted, likely due to increased expenses such as starting a family or buying a home.
  4. Risk Tolerance: 30% of Canadians have a decreased risk tolerance due to the pandemic.
  5. Previous Investment Behavior: In 2021, 20% of Canadian investors sold some investments during the pandemic due to needing extra cash or wanting to minimize losses.

Investment Goals

  1. Top Goals: Retirement savings (55%) remains the top investment goal, followed by generating income (43%) and building wealth (43%).
  2. Home Ownership: Only 24% see purchasing a home as a top goal, probably due to skyrocketing costs. In fact, 63% of non-homeowners feel they will never be able to buy a home.

Investment Management Preferences

  1. Self-directed vs Fully Managed: 23% of Canadians opt for self-directed investments, 20% prefer fully managed investments, and 22% combine both approaches. Newer trading apps have bolstered self-directed investments, but the trend may change if the markets remain unstable.
  2. Young Canadians: The younger generation leans towards a hybrid of self-directed and managed investments.

Investment Holdings Snapshot

  1. The majority of Canadians invest in Mutual funds (36%), Stocks (29%), and GICs (26%).
  2. 56% have their investments in a Tax-Free Savings Account (TFSA).

Values-Based Investments

  1. Young Canadians (18-24 years old) prioritize values-based investing, with 50% stating it’s very important.
  2. Sustainable investing, such as ESG or SRI, is increasingly becoming a significant factor across all generations, but it’s most prominent among the younger age groups.

The study concluded that economic instability has influenced Canadian investment behaviors, leading many to adopt a more cautious stance. While retirement savings remain a top goal for most, the dream of homeownership seems to be fading for a significant portion. The younger generation shows a penchant for values-based investments, underlining the shift towards more conscious investing.


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