Close to 70 per cent of millennials invest their money, but the vast majority of them – whether they invest their money in the markets or not – say they are clueless about investing, admitting they lack financial knowledge and investing confidence, finds a new CIBC poll of Canadians aged 18-34.
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“While it’s good to see that so many millennials recognize the importance of investing to build their net worth over time, our poll clearly shows they need help,” says Sarah Widmeyer, Managing Director and Head of Wealth Advisory Services, CIBC. “Their lack of knowledge is making them vulnerable to many common investing mistakes.”
Key poll findings include:
- 67 per cent of Canadians aged 18-34 have investments, including stocks, GICs, bonds and mutual funds
- 82 per cent don’t feel they have enough financial knowledge about investing
- Of those who invest,
- 41 per cent say they don’t get the returns they expect
- 28 per cent find it hard to develop a long-term investment strategy
- 21 per cent say they find it difficult to time the market
“Young investors often think the best way to build wealth is to chase stocks, but it’s virtually impossible to time the market,” says Ms. Widmeyer. “In reality, it’s all about getting into the habit of putting money aside on a regular basis, choosing good quality investments and sticking to your long-term plan.”
More than half of young women lack confidence
While confidence runs low among millennial investors generally, young women are even more hesitant when it comes to investing:
- More than half (58 per cent) of women lack confidence when it comes to investing, compared to only one third (36 per cent) of men.
- 61 per cent of women have investments, compared to 73 per cent of men.
“We clearly see a gender gap among millennials,” says Ms. Widmeyer. “We need to make sure children grow up to be financially fluent, and girls need to be part of that conversation.”
Investing 101 for beginners
The third (33 per cent) of millennials who aren’t in the market cited a lack of financial knowledge and the fact that investing “intimidates” them as the primary reasons they haven’t begun to invest. The other major reasons they cited were not having any money left at the end of the month and putting other financial priorities first, such as paying down debt or saving to buy a home.
For young Canadians struggling with investment decisions or wondering how to get started, Ms. Widmeyer offers the following advice:
Start small: Just putting away a little bit of money each month can get you into the habit of investing. Automate your monthly investments, even if it’s as little as $50 or $100. Time is on your side and returns will compound over the years.
Have a personal investment plan: Once you get into the habit, draw up a long-term plan. Ask yourself how much you can invest every month, what your expectations on return are, and what type of investment will help you achieve it.
Know your risk tolerance: Many investors have overly optimistic assumptions about how much risk they are willing to take. Define a realistic level of risk you are willing to take and ride out volatility.
Don’t put all your eggs in one basket: The key to reducing risk in your portfolio is to diversify your investments across asset classes, countries and industries.
Don’t chase performance: Finding the right time to buy and sell is almost impossible. Instead, invest a fixed-dollar amount in the same equity on a regular basis. Stay in for the long game, because the impact of market volatility on your investments decreases over time.
Key Poll Findings:
Young Canadians who have investments:
Young Canadians who consider themselves confident investors:
Key challenges young Canadians face with their investments:
|Getting the returns I expect||46%||36%|
|I don’t feel I have enough financial knowledge||30%||54%|
|Choosing the right asset allocation||29%||31%|
|Developing a long-term investment strategy||26%||31%|
|Timing the market||26%||16%|
|Sticking to my long-term investment strategy||22%||18%|
From November 24th to December 8th, 2015 an online survey was conducted among 1,004 randomly selected Canadian adults ages 18-34 who are Angus Reid Forum panelists. The margin of error — which measures sampling variability — is +/- 3.1%, 19 times out of 20. The results have been statistically weighted according to gender and region Census data. Discrepancies in or between totals are due to rounding.