The most popular investment choice of do-it-yourself investors is individual stocks. After that, things get weird.
In a recent survey of investors commissioned by the BC Securities Commission, 57 per cent of DIYers reported that they held stocks, while 33 per cent mentioned mutual funds, 28 per cent mentioned guaranteed investment certificates, 26 per cent included exchange-traded funds, 26 per cent owned crypto and 12 per cent owned government or corporate bonds.
So much for the idea of DIY investors being too cool for school where mutual funds are concerned. You’d expect mutual funds to dominate in portfolios built by advisers, and that’s in fact the case. In the BCSC survey, 54 per cent of advised investors said they held mutual funds, 21 per cent held stocks and just 10 per cent held ETFs.
But the comparatively high cost of owning mutual funds has long been thought of as a driving force for DIY investing and the rise of ETFs. The BCSC survey results suggest that as big as ETFs have become, there’s room for more in both DIY and advised portfolios.
It’s particularly jarring to see GICs ranked well ahead of ETFs by DIY investors, although this may be explained by a rise in interest rates that for a time produced GIC returns of 5 to 6 per cent. Expect the GIC component of all investor portfolios to ease back as existing holdings mature into a lower rate world.
Significant crypto exposure among DIYers is not a surprise per se, but it does suggest a lot of people are experimenting with this new and still controversial asset. On the survey’s list of investments held by advised investors, crypto did not receive a specific mention.
The heavy reliance on stocks by DIY investors is predictable, but it does raise questions about results. The knock on mutual funds is that they are run by professional portfolio managers who cannot produce after-fee returns that beat low-cost, index-tracking ETFs. Are the DIY investors holding stocks doing any better?
The small holding in corporate and government bonds by DIYers seems alarmingly low, but may not be an issue. The reason is that mutual fund and ETF holdings should include fixed income as well as equity funds.