7 Stats that Define Young Canadian Investors

7 Stats that Define Young Canadian Investors

To better understand the landscape of the average Canadian investor, I reached out to my LinkedIn network to participate in a survey.  The majority of people that participated are in their early 20s.  It is also great to see very young Canadians participate and surprisingly are already ahead of the game by having self-directed portfolios. 

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Age Bracket of Participants

Age-investing-survey

Being a young Canadian investor, it is not surprising my network that responded to the survey is generally younger.  It has never been easier to open a discount brokerage account and anyone can do it regardless of your age.  Simple index investing can be done with minimal amounts of capital.

 

1) Investing is Mostly Disregarded in School

When asked:  Do you agree that investing is mostly disregarded in school?

School-investing-survey

Of the almost 30 participants that responded, every single person agrees that the traditional classroom is failing us in an essential skill to building wealth. 

It should be no surprise that extremely expensive mutual fund fees that will really hurt the average Canadian over their lifetime of investing are charging exuberant fees. 

 

2) There is Huge Room for Improvement

When asked: What would you rate your knowledge on investing?

knowledge-investing-survey

The median score is 3 out of 5 and the average is 2.7.  Considering that the network that was surveyed on a professional career site who mostly went to finance or business school, it would be reasonable to assume that this is slightly higher than the average for the whole Country.

This tells us that there is a lot of room for individuals to get more comfortable with managing their own portfolio. 

Luckily, an index investing portfolio is possible for anyone with even knowledge self-rated as 1 out of 5 with my Guide to Index Investing Course.  This will give Canadians global portfolio exposure to companies around the entire world and get the average return of the whole stock market across broad indices with a few clicks of a button.  If your skill is self-rated of a three or higher and comfortable with owning a self-directed portfolio online, you may be interested in my latest stock picks.

Either way, it’s not hard to recognize that investing as a subject has been disregarded in school.  Let’s look at the next chart to prove that fact.

3) Most Current Investors went to School for Finance or Business

When asked: Did you go to post-secondary school for finance or business?

finance-school-investing-survey.

Exactly two thirds of participants attended post-secondary school, College or University, for Finance or Business.  My question then becomes, why is learning how to open your own portfolio not a mandatory requirement of graduating in this field? 

Now that we know what kind of educational background participants have, lets probe their confidence in investing as a subject in general.

 

4) Most People are Investing in Some Way - But not Necessarily Correctly

When asked: are you currently investing in any way?

current-status-investing-survey

74% of young Canadians are currently investing in some way.  However, as seen in the next takeaway, only 51% are managing the portfolio on their own.

Given that, there is opportunity to shift away from expensive actively managed mutual funds that are costing Canadians over $300,000 in their investing lifetime. 

Canadians who wish to move away from high fee structures to keep more of their own money should look into index ETF investing and will be pleasantly surprised at the ease of it.  Young people will wonder why them or their parents would ever be paying these fees when simply owning the stock market indices is a few clicks away.

 

5) Young Canadians are Eager to Manage their Own Portfolio

When asked: Would you be interested in learning how to manage your own portfolio through a discount brokerage service?

learn-investing-survey

This is the most exciting and encouraging result of the survey as young Canadians are willing to gain the confidence and know-how to take steps necessary to securing their financial future.

Opening a discount brokerage for a TFSA or an RRSP (interchangeably called self-directed brokerage account) has never been easier for beginners.

Over 85% of young Canadians are either already managing their own portfolio or would like to start doing so.  Given the new age of ease and amazing low-cost structure of managing your own portfolio, this is a very positive statistic.

 

6) Post-Secondary Education Is Not Practical in Portfolio Management

When asked: If you attended post-secondary education in finance or business, are you confident managing your own portfolio?

confidence-managing-portfolio.

A little over half of participants are comfortable managing their own self-directed portfolio.  This is slightly concerning as many finance majors are thrown into investment advising positions in financial institutions upon graduation.  Where is the disconnect? 

The theory is clearly not converting to practicality when investing.  Emotion and behavioural finance play a larger role in investing than can ever be quantitively measured.

 

7) Understanding the Structure and Difference of TFSA and RRSPs is Essential

When asked: Are you familiar with the structure of TFSAs and RRSPs

rrsp-tfsa-investing-survey

Understanding how RRSPs and TFSAs work and probably more importantly, their differences, is essential to managing a portfolio.   TFSAs are unfortunately often treated as cash accounts that can earn small amounts of tax-free interest.  Likely due to the fact it is called a Tax-Free Savings Account, it is treated as a cash account for savings. This should be avoided at all costs!  TFSAs should be used as an investment vehicle. 

Really, the name should be changed to TFIA for Tax Free Investment Account.  Use this as my unofficial statement to CRA requesting the change to help the average Canadian.  Completely tax-free capital gains are possible in a TFSA and these contribution limits should be maxed if possible given your financial situation.

Bottom Line:

Young Canadians are eager to be investing and potentially managing their portfolio for low fees and keep more of their hard earned money. It has never been easier to open a self-directed brokerage portfolio and get started regardless of investing expertise.


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