BMO Financial Group

BMO Financial Group
BMO Nesbitt Burns

BMO Nesbitt Burns

February 25, 2014 06:30 ET

Second Annual BMO Psychology of Investing Report: Research Trumps Emotion When Canadians Make Investing Decisions

- Canadians are 10 times more likely to rely on research than emotion

- However, only one in three relies completely on research and just 28 per cent report being in control of their emotions at all times

- Optimism, anticipation and confidence are the most common feelings associated with investing

- Canadians are upbeat about investing opportunities in Canada, but less optimistic about the loonie and interest rates

TORONTO, ONTARIO--(Marketwired - Feb. 24, 2014) - BMO Financial Group today issued the results of its second annual Psychology of Investing Report, which found that Canadians are 10 times more likely to classify themselves as research focused (71 per cent) than emotional (7 per cent) investors.

However, at the same time, only one in three reported that they rely completely on research, and just 28 per cent stated that they are in control of their emotions at all times when investing.

"In an ideal world, we'd base all of our investing decisions solely on rationality and research," said Mike Malloy, Senior Vice President, Managing Director, Regional Manager, BMO Nesbitt Burns. "However, we're only human so emotions can often cloud our judgment. The key to being a successful investor is to be self-aware when making decisions, understand what your risk tolerance should be and have a solid grasp of the fundamentals of the investing option you're considering along with the overall market climate."

Positively Emotional

The study also found that, for those who do let emotions play into their investing decisions, the emotions most commonly felt are:

  • Optimism (48 per cent)
  • Anticipation (35 per cent)
  • Confidence (35 per cent)

Only one in five reported feeling fear or apprehension when choosing an investment, with women more likely to feel one of these emotions than men (27 per cent vs. 16 per cent).

Canadian Investors Feeling National Pride

When asked to identify which geographies about which they are feeling most upbeat from an investing perspective, Canadian investors ranked their home and native land first, with 58 per cent being most optimistic about Canadian markets. This was followed by:

  • United States (34 per cent)
  • Asia (29 per cent)
  • Europe (21 per cent)

However, this national pride is tempered by a certain degree of unease, with just a third (34 per cent) of Canadians expressing optimism about domestic interest rates and the future prospects of the Canadian dollar.

"Canada's fundamentals have remained solid over the last several years, so it's not surprising that we tend to be upbeat about domestic investing prospects," noted Mr. Malloy. "However, this sense of optimism is somewhat tempered by concerns over the recent decline in the loonie and unease about what the future has in store for interest rates."

Regional Breakdown:

Region % that rely on research for their investing decisions % that rely on emotion for their investing decisions % that are optimistic about investing in the Canadian market % that are optimistic about interest rates % that are optimistic about the Canadian dollar
National 71 7 58 34 34
Atlantic 65 8 56 33 38
Quebec 73 10 61 41 39
Ontario 72 5 61 33 35
Prairies 70 3 55 39 29
Alberta 75 6 57 31 33
B.C. 66 7 47 29 20

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The survey results cited in the BMO Psychology of Investing Report are from online interviews with a sample of 1,005 Canadians 18 years of age and older, conducted between January 24th and January 28th, 2014. A probability sample of this size would yield results accurate to ± 3.1 per cent, 19 times out of 20.

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