A survey finds that a slight majority of Canadian investors don’t react when they experience a major loss.
The 2014 Canadian Money State of Mind Risk Survey conducted for the Investor Education Fund (IEF) shows there are two dominant patterns of response to a large loss: do nothing (51%) or flee to safety (36%) for either a short time or permanently.
There is a small group (13%), relatively high risk in profile, that tries to recoup its loss by buying more of the losing investment at a lower price in hope of recouping losses when the price rises.
High-income households are more likely to just monitor their accounts, while low-income households are more likely to switch to safer investments and cut back on spending.
The survey also finds that the demographics of a major investment loss reflect the risk profile of demographic groups.
Men are more willing to take more investment risk and are much more likely to have experienced a major investment loss than women. Risk of a major loss increases with age (and time investing) until age 46 to 55 and then levels off.
High-risk investors rate Canada Savings Bonds and guaranteed investment certificates as the “worst-performing products.” Low-risk investors rate Canadian stocks as the “worst-performing product.”
Risk-taking attitudes and buying behaviour differ.
Almost one-quarter of low-risk investors own “medium- to very high-risk” products, and, conversely, seven out of 10 high-risk investors own “low- to medium-risk” products. With the exception of “medium- to very high-risk” investment products, there is little differentiation in product buying according to self-assessed investment risk-taking.
More than 2,000 Canadians participated in the survey, which was conducted by The Brondesbury Group. The IEF is a non-profit organization founded and supported by the Ontario Securities Commission.
How do you compare? Take the survey on the IEF website.
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