The 37th quarterly Manulife Investor Sentiment Index, a national poll conducted for Manulife Financial in March, showed that during the first quarter of 2008 “concerns about swinging equity markets and the U.S. sub-prime lending,” somewhat dampened Canadian’s positive outlook toward investing, particularly in equities.
The index ranks six investment categories, one of which is balanced funds. In the previous survey released in December 2007, balanced funds were ranked second among most popular investment targets. This quarter they were in fourth place with 44% of respondents saying that balanced funds are a good or very good place to invest and 27% who said the opposite.
This result places balanced funds below “investing in their own homes” which ranked number one, investing in “investment real estate” ranked number two and “fixed income investments (including GICs and annuities),” that came in third. Cash and equities were fifth and six respectively.
Last December, the index showed balanced funds were seen as a good or very good place to invest by 50% of respondents and only 16% said the opposite. Doug Conick, vice-president, investment funds, for Manulife said that the poll shows that when the markets get rocky, people get nervous about mutual funds, even balanced funds. Sometimes investing in a balanced fund gives people a “false sense of security.” Even with their mix of equities and fixed income investment, a balanced fund can still get hit hard in a downmarket and some investors “get scared of the rollercoaster ride.” Still, over the long-term, balanced funds will remain a popular investment choice, Mr. Conick believes.
Results from the poll also indicated that seg funds are “perhaps the least understood of investment vehicles.” Mr. Conick says that there is a need for more education about seg funds among advisors. Advisors who deal with nervous clients can use seg funds as an investment vehicle that will keep them invested in the market during volatile times by providing them “with comfort and downside protection.” This is a better strategy than parking money in money markets, savings accounts, or GICs, he suggests.