Canadians still favour their own country’s stocks

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Far fewer people are willing to invest in equities these days, but the Canadians who do are still happy to rely on returns from their own country's stocks.

At the end of February, investments in Canadian companies accounted for 58 per cent of all equity mutual fund money, according to the Investment Funds Institute of Canada. That's almost exactly the same figure as the 56 per cent invested in domestic equity funds in February, 2008, back when the financial world looked a lot different.

There are myriad reasons for this. The simplest explanation: It's easier to invest in equities priced in your home currency. But you have to wonder if too many Canadians are really missing out on opportunities elsewhere.

After plunging Wednesday, the S&P/TSX composite index's year-to-date return is roughly nil, while the S&P 500 is up 9 per cent. On top of that, the U.S. dollar has gained 2.3 per cent on the loonie over the same period, boosting returns for those who invested south of the border.

To be fair, some people are catching in on this rise, with U.S. equity funds now accounting for 11 per cent of all mutual fund money, up from 7 per cent in 2009. And Canaccord Genuity analyst Scott Chan notes that U.S. equity funds have generally generated net sales in each of the last 14 months. So there is some progress.

However, these changes pale in comparison to the major shift in the broad asset mix. Five years ago, 45 per cent of mutual fund money was invested in equities; today, it is just 31 per cent.

Contrarily, balanced funds now make up 48 per cent of all the money invested in mutual funds, up from 36 per cent, and bond-fund weightings have almost doubled to 17 per cent from 9 per cent.

(Tim Kiladze is a Globe and Mail Reporter.)

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