Please accept the terms and conditions before continuing:
CANADIAN INSTITUTIONAL INVESTORS ONLY
THIS SITE IS INTENDED FOR CANADIAN INSTITUTIONAL INVESTORS ONLY. IT IS NOT INTENDED FOR THE GENERAL PUBLIC OR FOR INVESTORS THAT DO NOT RESIDE IN CANADA BY ACCEPTING THIS TERMS OF USE AGREEMENT, YOU CONFIRM THAT YOU ARE ENTITLED, UNDER THE SECURITIES LEGISLATION OF YOUR PROVINCE OF RESIDENCE, TO PURCHASE SECURITIES WITHOUT THE BENEFIT OF A PROSPECTUS BECAUSE YOU ARE (I) AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF NATIONAL INSTRUMENT 45-106 PROSPECTUS AND REGISTRATION EXEMPTIONSAND/OR (II) A “PERMITTED CLIENT” WITHIN THE MEANING OF NATIONAL INSTRUMENT 31-103 REGISTRATION REQUIREMENTS, EXEMPTIONS AND ONGOING REGISTRANT OBLIGATIONS.
If you are a Canadian resident and seek information on products and services available to the general public, please visit the Franklin Templeton public website at franklintempleton.ca. If you do not reside in Canada, please visit our international websites link for assistance with products and services legally available in your place of residence.
Nothing on this Site shall be considered a solicitation to buy or an offer to sell a security, or any other product or service, to any person in any jurisdiction where such solicitation, offer, purchase or sale would be unlawful under the laws of that jurisdiction.
Please read the Terms of Use Agreement and indicate your acceptance.
CanadaGOLF’S DREADED WATER HAZARD HAS A LESSON FOR INVESTORS
Fear of Risk Can Put Investment Plans Under Water
That dreaded ‘ker-plunk’ gets in our heads and can lead some golfers to play it a little too safe. It’s the same way with investing. Too much caution can keep you from achieving long-term gains.
This is the latest in Franklin Templeton’s series, “Behavioural Finance for Everyday Investors”, where we describe common investment barriers – so you can overcome them.
Fear drives investors into cash
Losing hurts. A lot. In fact, we’re wired to experience the pain of losses twice as powerfully as the joy of gains. Consequently, we’re motivated to avoid losses at almost any cost. That’s why so many investors retreat to the perceived safety of cash or cash equivalents when the market dips.
CASH INCREASES DURING MARKET PULLBACKS
But safety may come at a cost
The blue line in the chart below shows the average yield of money market accounts since 2000. As of December 31, 2018, it’s hovering at 0.8%. Not great, but safe. At least it looks that way until we account for inflation, which is represented by the green line.
Some investors may be surprised to learn that by holding onto their cash, they’re actually slowly eroding their purchasing power. If you’re not at least meeting inflation, you’re falling behind.
MONEY MARKET ACCOUNTS’ AVERAGE YIELD BEFORE AND AFTER INFLATION
January 1, 2000 – December 31, 2018
These charts are for illustrative purposes only and do not reflect the performance of any Franklin Templeton fund.
Sources: Canadian investors moving to cash during market pullbacks: Strategic Insight Inc.; Canadian Money Market Fund Yields: Morningstar Research Inc.; Canadian Inflation Rate: Statistics Canada.
Investor Behaviour
Investments entail risks, the value of investments can go down as well as up and investors should be aware they might not get back the full value invested.
