A recent survey commissioned by the British Columbia Securities Commission (BCSC) has shed light on the diverse and often unexpected composition of do-it-yourself (DIY) investor portfolios. While individual stocks remain the most popular investment choice among DIYers, the survey highlights a range of assets that reveal an unconventional approach to personal finance.
According to the survey, 57% of DIY investors hold individual stocks, a figure that underscores the enduring appeal of this traditional investment option. However, what follows in their portfolios is less predictable and, at times, surprising.
Mutual Funds Still in Play for DIY Investors
Contrary to the perception that DIY investors steer clear of mutual funds due to their high fees, 33% of respondents reported holding mutual funds. This contrasts with the belief that such investors favour low-cost alternatives like exchange-traded funds (ETFs). Personal finance columnist Rob Carrick noted, “You’d expect mutual funds to dominate in portfolios built by advisers, and that’s in fact the case.” In the same survey, 54% of advised investors held mutual funds, suggesting that the product remains a significant part of both advised and DIY portfolios.
GICs and Crypto Gain Ground
One of the more unexpected findings from the survey was the prominence of guaranteed investment certificates (GICs) in DIY portfolios. GICs, which accounted for 28% of holdings, ranked ahead of ETFs, which were held by just 26% of DIY investors. Carrick pointed out that this may be linked to recent rises in interest rates, which saw GIC returns briefly spike to 5-6%. However, he added, “Expect the GIC component of all investor portfolios to ease back as existing holdings mature into a lower rate world.”
Perhaps less surprising, though still significant, is the inclusion of cryptocurrency in 26% of DIY portfolios. While crypto has not yet earned a specific mention among advised investors, its growing presence in DIY portfolios suggests that many are keen to experiment with this volatile and often controversial asset. The survey highlights that despite the risks, many retail investors are intrigued by the potential gains offered by digital currencies.
Stocks Dominate, but Bonds Lag
The survey’s results also highlight the strong preference for stocks among DIY investors, though this raises some important questions about performance. Carrick noted, “The heavy reliance on stocks by DIY investors is predictable, but it does raise questions about results.” He referred to the longstanding criticism of mutual funds, which are often accused of underperforming low-cost index-tracking ETFs after fees are factored in. The survey didn’t delve into whether DIY investors were outperforming these managed funds, leaving the question open as to whether their stock-picking strategies were yielding better results.
One area where DIY portfolios appear to be lacking is in bonds. Only 12% of respondents reported holding government or corporate bonds, a figure Carrick found concerning. However, he suggested that this may not be as troubling as it seems, since many mutual funds and ETFs likely contain fixed-income assets alongside equities. Still, the low bond exposure could leave some DIY investors vulnerable to market volatility.
Room for Growth in ETFs
While ETFs have gained significant popularity in recent years, the survey suggests there is still considerable room for growth in both DIY and advised portfolios. Only 26% of DIY investors reported holding ETFs, a figure that might seem low given the widespread praise these products have received for their low fees and broad market exposure.
As the financial landscape continues to evolve, the BCSC survey offers a snapshot of the sometimes unconventional approaches that DIY investors are taking. While traditional stocks remain a mainstay, the inclusion of assets like GICs and crypto reflects the shifting priorities and preferences of a new generation of investors. Whether these strategies will prove successful in the long run remains to be seen, but for now, the portfolios of DIY investors provide a fascinating glimpse into the future of personal finance.
