2019 is sure to be an exciting year for Canadian investors. The markets in Canada have continued to evolve over the last few years, including access to a more extensive selection of products to choose from, new methods to create portfolios, and increased access to hard-to-find investments. Throughout the year, there are three trends that we can expect to emerge that will allow Canadian investors to develop more diversified portfolios that can withstand the volatility that often occurs within the market.
While liquid alternatives have been available in the United States for some time now, Canadian investment firms will be introducing them as of January 3rd for sale. These funds, which are both mutual and exchange-traded, will be ideal for the Canadian market, as they have the capability of providing investors with non-correlated assets. This means that these funds will tend to either stay stable or increase in price when the markets fall. Since the stock markets in Canada are heavily concentrated in finance, materials, and energy sectors, this will allow for more diversification, which is critical for portfolios.
ETFs Continue to Rise
Exchange-traded funds, or ETFs, will continue to rise as the year progresses. Despite being around for years, the utilization is not as significant as that in the United States. For example, in October of 2018, about US$3.5-trillion had been invested in ETFs in the United States, while only about $157-billion had been invested in Canada. ETFs will provide investors with the opportunity to create more diversified and personalized portfolios and is expected to gain significant traction. Some reports even estimate that we could see assets under management triple within the next five years.
Socially Responsible Investing (SRI)
During the next few years, we can expect to see SRI’s, also called sustainable and impact investing, have a more significant influence on portfolios. At the end of 2017, Canada had seen an increase of SRI strategies of $2.1-trillion, a considerable increase of 41.6 percent compared to that in 2015. This number is only expected to increase. Millennials are 65 percent more likely to consider socially responsible companies in their portfolio than that of baby boomers, which in turn is allowing SRIs to become more mainstream. This will contribute to impact investing having a more prominent role in Canadians investment decisions.