About a quarter of Canadians are losing confidence in the stock market and are now looking to cash in on their investments, according to a new survey.
The survey, conducted by personal finance comparison website Finder, found that those looking to withdraw money amid recent market volatility may also do so because they feel pressure on their budget.
Finder personal finance expert Romana King said Canadians feel the pressure when it comes to rising costs and may be looking to increase the amount of money they have on hand to make ends meet.
If Canadians have high-interest loans, for example, they may be looking at their budget and wondering where else they can find money to pay down their debt, he said.
Jason Heath, managing director of Objective Financial Partners Inc., said he was not surprised that some Canadians have lost confidence given that the TSX is down 10 percent over the past year and the S&P 500 is down 17 percent.
“Some of the high-flying tech and meme stocks of 2021 have had a terrible year in 2022,” he said.
He explained that investors can often make the mistake of being emotional or reactive to short-term performance instead of investing for the long term.
“These findings support the idea that successful stock investing generally requires patience and a time horizon of more than five years. But short-term losses tend to cause some investors to panic,” he said.
The report said that of those looking to withdraw money, low- and middle-income households made up the majority.
Findings also differed along generational lines. The younger the investor, the more certain they are that the market will turn from bearish to bullish again, according to the report. They were also more confident that they would make a profit in 2022, regardless of current conditions.
Baby boomers, on the other hand, were less confident that they would be able to meet or exceed their investment return projections for the year, and were more likely to want to withdraw money.
In this scenario, older investors may also be looking to make retirement withdrawals.
For Canadians planning to stay in the market and navigate a recession, their top three investment strategies are buy-and-hold (41 per cent), income investing (nine per cent), and indexing and some selected holdings (seven per cent). .
If stock market volatility makes investors uncomfortable, Heath said they may need to reevaluate their asset allocation and consider having less risk in their investment portfolio.
“Times like these are a good test for investors,” he said. “If you have a long time horizon, I would avoid panicking and trying to sell and buy back at a lower level.”
“It can be quite difficult to get it right once, let alone twice, with market timing. Even experts tend to do a poor job of getting in and out of stocks wholesale.”
Young investors should consider whether there is a buying opportunity to get shares at a lower price, he said.
“Others should remember that North American stocks returned over 25 percent in 2021, which is like three good years of investment performance in one year, so we may have just given back some of that temporary wealth.” .
This report from The Canadian Press was first published on October 4, 2022.