Research trumps emotions when it comes to investing

Canadians are 10 times more likely to classify themselves as research focused (71%), than emotional (7%) investors, finds BMO’s Psychology of Investing Report. However, at the same time, only one-in-three relies completely on research, and just 28% state they’re in control of their emotions at all times when investing.

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“In an ideal world, we’d base all of our investing decisions solely on rationality and research,” says 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.”

Read: Advising new breadwinners For those who do let emotions play into their investing decisions, the emotions most commonly felt are: optimism (48%); anticipation (35%); and confidence (35%). 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% vs. 16%).

When asked to identify which geographies they’re feeling most upbeat about, Canadians ranked their native land first, with 58% being most optimistic about Canadian markets. This was followed by: the U.S. (34%); Asia (29%); and Europe (21%).

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However, this national pride is tempered by a certain degree of unease, with just a third (34%) 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,” notes 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.”

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.