TORONTO, Feb. 13, 2013 /CNW/ - When the pullback of the stock markets
happened in 2008, many investors let emotions overtake their investment
plans. Behavioural economics sheds light on why negative events seem to
have a profound and lasting ability to derail investors' longstanding,
Franklin Templeton's Time to Take StockTM examines the current situation facing investors and the human
behaviours that impact investment decisions. It explores important
facts investors may be missing regarding more recent positive market
developments around the world, and provides straightforward strategies
to help investors reposition their portfolios with an appropriate
allocation to Canadian and global equities and fixed income.
According to Franklin Templeton's recent Canada investor survey hosted
on the Angus Reid Forum, a third (34 per cent) of Canadian investors
acknowledge that they take an emotional approach to investing and
another quarter (26 per cent) are unsure of whether they do or not.
"Canadians are still looking at equities through 'bear market glasses'.
The dramatic market drop of 2008 continues to stand out in investors'
minds, even as the market has climbed back up," said Ronice Barlow,
head of strategic planning & business development - Canada, Franklin
Templeton Investments Corp. "Many investors who instinctually moved
money out of equities into traditionally 'safe' investments a few years
ago are finding that many of these strategies have been offering a
marginal or negative real return because interest rates are so low."
In fact, when Canadian investors were asked if they currently view fixed
income assets (including bonds and bond mutual funds) as a "safe haven"
for their money, 61 per cent indicated that they do, according to the
January 2013 Canada investor survey. Also, over a third (35 per cent)
believe that fixed income assets offer the best returns in today's
markets. These views on fixed income may be keeping many investors on
the equity market sidelines, and further from their long-term financial
goals, in a period where the S&P/TSX Composite index has risen about 68
per cent since the market bottom in March 2009.*
Time to Take Stock explores three behavioural finance concepts as a
window into why investors hold the beliefs and make the decisions they
Availability Bias - Decision-making is greatly influenced by what is personally most
relevant, recent or dramatic. For investors, this can mean that the
unprecedented events of the 2008 financial crisis have left a stronger
impression than the 68 per cent gain in the S&P/TSX Composite index
since the market bottom.*
Loss Aversion - The pain of loss is generally much stronger than the reward felt from
a gain. The desire to avoid market losses has driven many investors to
move their money out of stocks into low-yielding cash equivalents such
as money market instruments or Guaranteed Investment Certificates
Herding - An innate tendency to follow the crowd makes it easy for investors to
get caught up in "what everyone else is doing." This can cause
investors to lose sight of their long-term goals and pull their money
out of equities at the wrong time or sit on the sidelines in cash while
the market rises. More than half of Canadians surveyed (59 per cent)
report that they don't pay attention to what others are doing when
investing, yet the exodus from the equity markets paints a different
"We encourage investors to meet with their financial advisor to figure
out their long-term objectives and risk tolerance. An advisor can help
them remove the emotion from their investment decisions and position
their portfolio to meet their future goals," added Ms. Barlow.
Time to Take StockTM is the latest in Franklin Templeton's series of thought leadership
pieces that demonstrates why equities are a critical component for
investors' long-term success. Investors can find more information on franklintempleton.ca.
About Franklin Templeton Investments
Franklin Resources, Inc. (NYSE: BEN) is a global investment management
organization operating as Franklin Templeton Investments. Franklin
Templeton Investments provides global and domestic investment
management solutions managed by its Franklin, Templeton, Mutual Series,
Bissett, Fiduciary Trust, Darby, Balanced Equity Management and K2
investment teams. The San Mateo, CA-based company has more than 65
years of investment experience and over US$809 billion (over C$807
billion) in assets under management as of January 31, 2013.
Franklin Templeton Investments Corp. has more than 600 employees
providing services to more than one million unitholder accounts and
more than 200 pension funds, foundations and other institutional
investors. Additional information on Franklin Templeton Investments
Corp. can be found at www.franklintempleton.ca
About the survey
On January 15 and 16, 2013, an online survey was conducted among 946
randomly selected Canadian adults who currently invest in stocks, bonds
or mutual funds, or have done so in the past five years, and who are
Angus Reid Forum panelists. The margin of error which measures sampling
variability is +/- 3.05%, or 19 times out of 20. The results have been
statistically weighted according to the most current education, age,
gender and region census data. Discrepancies in or between totals are
due to rounding.
* Source: FactSet, TSX. © 2013 FactSet Research Systems Inc. All Rights
Reserved. The information contained herein: (1) is proprietary to
FactSet Research Systems Inc. and/or its content providers; (2) may not
be copied or distributed; and (3) is not warranted to be accurate,
complete or timely. Neither FactSet Research Systems Inc. nor its
content providers are responsible for any damages or losses arising
from any use of this information. Past performance is no guarantee of
future results. Source: TSX © Copyright 2013 TSX, Inc. All Rights
SOURCE: Franklin Templeton Investments Corp.
For further information:
Sarah Kingdon, Corporate Communications, Franklin Templeton Investments, 416.957.6191