RRSPs, RESPs and own homes show strong gains
WATERLOO, ON, Dec. 21, 2005 – Canadians’ investor sentiment climbed to its highest level in more than four years this month, according to a national poll for Manulife Financial, Canada’s leading insurance and wealth management company.
The 28th quarterly Manulife Investor Sentiment Index, based on a survey in early December, found seven of 10 categories of investments and vehicles gained ground from the last previous poll in September. Registered Retirement Savings Plans, Registered Education Savings Plans and investing in their own homes showed the strongest gains, while cash, investment property and balanced funds registered slight declines.
The survey of 1,003 Canadians by Maritz Research showed the overall Manulife Investor Sentiment Index gained one point from September, to reach +25 – its highest level since June 2001 and a strong increase from +17 a year ago.
“We’ve seen some dramatic swings in the index since 2001, but the last several quarters reflect a strong focus on long-term savings and investment plans,” said Bruce Gordon, Manulife Financial’s Senior Executive Vice President and General Manager, Canada. “Since this survey was launched seven years ago, it’s found Canadians generally committed to investing, even through major international incidents, market setbacks and most recently higher energy prices.”
Better off than five years ago
Responding to a separate question, more than half of Canadians polled said they’re better off now than five years ago (55 per cent), compared to 21 per cent who feel they are in the same financial condition. Twenty-three per cent said they feel they’re worse off than in 2000.
When asked about their financial goals, those surveyed said their top priority is to pay down their consumer debts. Twenty-five per cent chose reducing overall debts as their top concern, up from 21 per cent a year ago. Paying down their mortgage ranked second (13 per cent), just ahead of saving for retirement (12 per cent). Seven per cent said saving to buy a home was their top priority.
The overall index
Since it was launched in 1999, the Manulife Investor Sentiment Index has remained in positive territory overall, peaking at +35 in early 2000 and hitting a low of +11 in December 2001.
Stock market volatility led to its first major decline in the first half of 2001. Continued stock market woes and terrorist attacks in the United States led to a sharp decline in the index in September 2001.
“We’ve seen the index near this level only four times since 2001 and the past two quarters have reached four-year highs,” Mr. Gordon added.
“Manulife offers a wide range of financial services and products to more than one in five Canadians,” Mr Gordon said. “We always encourage investors to work closely with their advisors, particularly given changes in the economy and markets. That helps them to balance guaranteed versus variable investments as well as stay focused on their long and short-term goals.”
The quarterly index monitors how Canadians say they feel about investing in 10 different categories and vehicles. The index reflects the percentage of those who say they believe it is a good or very good time to invest – minus those who feel the opposite.
RRSPs, RESPs and own homes show largest gains
Among six investment categories and four vehicles measured each quarter, all remained in positive territory. Registered Retirement Savings Plans, Registered Education Savings Plans and investing in their own home showed the largest gains since September, with RRSPs up 10 points, RESPs up nine, while investing in their own homes rose seven points.
The Manulife Investor Sentiment Index is determined by the following six investment categories, shown by order of their overall ranking in the survey.
Investing in their own homes (either through renovations or paying down the mortgage) remains the most popular place for Canadians to put their money. The real estate index rose to +55, up seven points from September. The index reflects 67 per cent of those surveyed who said it’s a good or very good time to invest in their own residence, minus 12 per cent who believe it’s a bad or very bad time.
Real estate other than their own homes was the next most popular investment, at +31, down one point from the previous survey.
The third most-popular category, balanced funds, eased two points to +27. Among those surveyed, 47 per cent felt balanced funds are a good or very good place to invest, compared to 20 per cent who said the opposite.
Fixed income investments (including GICs and annuities) rose five points to +26. Fixed income began gaining ground in late 2004, amid speculation of possibly higher interest rates, and continues to remain high compared to its low of +4 in mid-2004.
After holding steady last quarter, the index for stocks gained four points to reach +11. The stocks index reflects 36 per cent who said it’s a good or very good time to invest in stocks, either directly or via mutual funds, while 25 per cent
view equities as a bad choice. Another 20 per cent felt it’s neither a good or bad time to buy shares.
Cash (including savings accounts) showed the largest decline this quarter, losing five points to remain the least favourite destination for investments at +2.
As well as evaluating the six investment categories, the same question was asked of four investment vehicles.
After showing the only decline last quarter, Registered Retirement Savings Plans shot back and remains the leading investment vehicle. In December, the RRSP index rose 10 points to +56. That result reflects 69 per cent of respondents who feel it’s a good or very good time to put money into RRSPs, while 13 per cent said it is a bad or very bad time.
After posting the largest increase last December, Registered Education Savings Plans again showed gains by climbing nine points to +49. The index for RESPs is based on 63 per cent who say now is a good time to invest, compared to 14 per cent who disagree.
The index for mutual funds gained two points to +25. The Manulife survey found 44 per cent of those surveyed said now is a good or very good time to invest in mutual funds, while 19 per cent said it was a bad or very bad time. Another 19 per cent answered that it was neither a good or bad time for funds.
Segregated funds showed another gain in December, climbing three points after six-point gains in both June and September. The seg fund index now stands at +21. Similar to the results for mutual funds, 44 per cent of those surveyed said it’s a good time to invest in segregated funds. Some 23 per cent stated the opposite.
The poll by Maritz Research was conducted with 1,003 Canadians aged 18 and older between December 1 and 6, 2005. The results have a margin of error of +/- three per cent, 19 times out of 20.
About Manulife Financial
Manulife Financial is a leading Canadian-based financial services group
serving millions of customers in 19 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States, the Company offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners. Funds under management by Manulife Financial and its subsidiaries were Cdn$360 billion (US$310 billion) as at September 30, 2005.
Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘0945’ on the SEHK. Manulife Financial can be found on the Internet at www.manulife.com.