Cash, RESPs gain ground: fixed income, segregated funds remain stable
WATERLOO, ON, Oct. 24 2008 – Cash and fixed income investments are narrowing the gap on Canadians’ own homes as the most popular havens to put money these days, according to a national poll for Manulife Financial, Canada’s leading insurance and wealth management company.
Registered Education Savings Plans and segregated funds also appear as stable investment vehicles with Canadians these days, as daily news reports cover volatile stock markets and the troubled U.S. economy. In its latest quarterly survey, the 39th quarterly Manulife Investor Sentiment Index fell back 16 points in early October to reach +8, its lowest point since the survey began in 1999.
The national telephone poll of 1,000 Canadians by Maritz Research in early October found eight among 10 investment categories and vehicles declined from the previous June survey.
“Overall market volatility is unsettling for many Canadians and the tendency is to seek a safe haven,” said Paul Rooney, President and CEO, Manulife Canada. “But we always encourage investors to work closely with their own advisors, particularly given short-term changes in the economy and markets.”
“Working with an advisor and sticking to a plan can help balance guaranteed versus variable investments, as well as stay focused on short- and long-term goals.”
Manulife serves more than one in five Canadians with a wide range of financial services and products, and among our key objectives is to help them make better financial decisions, added Mr. Rooney.
The overall index
Since its launch in 1999, the Manulife Investor Sentiment Index has remained in positive territory overall. It peaked at +35 in early 2000, but fell to +11, in December 2001. During the past two years, the index had generally remained near six-year highs, above +20.
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.
One of six investment categories gain ground
Only cash gained ground in the latest national survey, while investment real estate took another hard hit from Canadians, dropping into negative territory for the first time since 1999. Balanced funds and stocks also faced major setbacks when Canadians were asked if they’re a good place to invest.
After dropping 11 percentage points in June, investment property registered a strong drop again in October by falling 26 percentage points. Principal residences kept their place as the most popular investment category – yet support for investing in their own home also eased 10 percentage 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 – a consistent finding since 1999. The index for investing in their own home fell 10 points in October to +43. The index reflects 60 per cent of those surveyed who said it’s a good or very good time to invest in their own residence — minus 17 per cent who believe it’s a bad or very bad time.
- Fixed income investments (including GICs and annuities) remained in second place, tied with cash this quarter, among most popular categories, falling back two points from June. At +26, the index remains high compared to its low of +4 in mid-2004.
- Cash (including savings accounts) was the only investment category to gain this quarter, by climbing three points to +26. Since 1999, cash has traditionally been the least favourite place named by Canadians to leave their money, but it now ranks higher than balanced funds, investment real estate and equities in the most recent poll.
- Balanced funds fell to fourth place among the most-popular investment targets, losing 33 points to sit at -8. Among those surveyed, 32 per cent felt balanced funds are a good or very good place to invest, compared to 40 per cent who said the opposite in October.
- Investment real estate dropped sharply, falling from its second-place rank in March to place fifth among investment categories in October. At -9, investment real estate fell into negative territory for the first time since the survey began.
- After marginal gains in the past year, the index for equities dropped back 27 points in October to sit at -28. The stocks index reflects 23 per cent who said it’s a good or very good time to invest in stocks, either directly or via mutual funds, while 51 per cent saw equities as a bad choice. Another 12 per cent felt it’s neither a good or bad time to buy shares.
As well as evaluating the six investment categories, the same question was asked of four investment vehicles.
- Registered Education Savings Plans took over the top spot among favourite vehicles in October, climbing three points to reach +48 in the latest poll. Some 62 per cent of those surveyed said now is a good time to invest, compared to 14 per cent who disagreed.
- Among Canadians’ traditional favourite investment vehicles, Registered Retirement Savings Plans showed a significant drop of 18 points in October. At +38, the latest results for RRSPs reflect 58 per cent of respondents who feel it’s a good or very good time to put money into an RRSP, while 20 per cent said they feel it is a bad or very bad time.
- Segregated funds showed strong stability in October and overtook mutual funds to stand at +20. New products, like Manulife’s IncomePlus, aimed to protect investors from the downside of the market, have been popular since the initial launch two years ago of the first guaranteed minimum withdrawal benefit product in Canada.
- At -9, the index for mutual funds fell 31 points from the last quarterly survey, reflecting 30 per cent who said now is a good or very good time to invest in mutual funds, while 39 per cent said it was a bad or very bad time. Another 17 per cent answered that it was neither a good or bad time for funds.
The poll by Omnitel, a division of Acrobat Research, was conducted with 1,000 Canadians aged 18 and older between October 2 and October 6, 2008. The results have a margin of error of +/- three percentage points, 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$400 billion (US$393 billion) as at June 30, 2008.
Manulife Financial is one of two publicly traded life insurance companies in the world whose rated life insurance subsidiaries hold Standard & Poor’s Rating Services’ highest “AAA” rating.
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.