TORONTO – The Ontario Securities Commission (OSC) today published a new study focused on the recent experiences of self-directed or do-it-yourself (DIY) retail investors. The OSC surveyed 2000 Canadian investors who trade a portion or a majority of their investments through the order-execution-only (OEO) dealer channel.
Approximately 10 per cent of self-directed investors surveyed opened their account since the pandemic began and we wanted to know more about who self-directed investors are, why they chose to go it alone for at least some of their investments, and where they get information. The majority of DIY investors are male, and more than half are either young or retired and have graduated from university. Many self-directed investors are trading because they enjoy it, however, the experience is not always seamless as 10 per cent had trouble accessing their accounts, and 17 per cent had issues completing a trade during the pandemic.
To make decisions, self-directed investors believe that important information sources include: their own personal experiences with a company, its financial performance, and availability of a marketplace to trade. A notable proportion (about 13 per cent) seek information through social media.
“There has been a significant rise in do-it-yourself investing this past year in Canada and other countries,” said Tyler Fleming, Director of the Investor Office at the OSC. “We are closely monitoring developments in this investing channel to inform our regulatory activities.”
The study has several findings, including:
- Opening of New Accounts: 10 per cent of self-directed investors opened their account during the pandemic, while half of self-directed investors have held their account for five years or more. This indicates that the rate at which investors are opening OEO accounts is accelerating.
- Seeking Advice: 16 per cent of DIY investors started investing through an advisor due to the COVID-19 pandemic. This significant minority of self-directed investors were managing their own portfolio, but the pandemic caused them to seek out professional investment advice.
- Difficulty Accessing their Accounts: One in ten self-directed investors experienced issues accessing or logging into their account during the pandemic due to technical issues with their broker or dealer.
- Difficulty Completing Trades: 17 per cent of DIY investors had an issue with being able to enter or complete a trading order during the pandemic. Difficulty accessing accounts and completing trades can significantly affect investor outcomes and experiences.
- Demographic Profile: 60 per cent of self-directed investors are men and just over a quarter (26 per cent) of them are aged 18 to 34. Almost a quarter (23 per cent) are retirees.
- Reasons to Be Self-Directed: 44 per cent choose to be because they enjoy it and 34 per cent do so because they see advice as too expensive. 27 per cent of advised investors have a secondary self-directed account because they like to take more risk with that account.
- Attitude Towards Risk: 11 per cent of self-directed investors have an aggressive attitude towards risk. These investors are more likely to own cannabis stocks, venture issuer stocks and crypto assets.
- Investment Products Owned/Traded: DIY investors own a mix of products including mutual funds (63 per cent), individual securities (59 per cent), and ETFs and REITS (31 per cent). 21 per cent of self-directed investors have traded cannabis stocks, 19 per cent have traded junior stocks, 14 per cent have traded leveraged or inverse ETFs, 9 per cent crypto-assets and 6 per cent options/puts.
- Trading Activity: 74 per cent of self-directed investors say they make 50 or fewer trades per year. This suggests that a very active minority of investors has driven the large increase in retail trading volumes during the pandemic.
- Information Sources Used: The most important information used to make investment decisions are: their own personal views based on their experiences with a company’s products and services; earnings before interest, taxes, depreciation and amortization (EBITDA), and availability of a marketplace or trading facility to trade.
- ESG Information: 33 per cent of self-directed investors say that the available ESG information helps them make better investment decisions, 28 per cent do not know and 39 per cent disagree. Of the investors that believe ESG factors are important, 18% do not find the available ESG to be very helpful in making investment decisions.
- Social Media: 13 per cent of DIY investors consider posts on social media and online message boards such as Reddit, Twitter and Facebook to be important sources of information. Of the information sources presented, investors indicated that this was the least important; however more recent DIY investors and frequent traders are significantly more likely to rely on social media.
- Investor Satisfaction: 69 per cent of self-directed investors are satisfied with their experience as an investor.
- The full survey findings are available online at InvestorOffice.ca.
The OSC conducted a survey of 2,000 Canadian investors who either have a self-directed account as their primary account or who have an advisor but also have their own secondary self-directed account between November 17 to December 6, 2020 to further its understanding of retail investor experiences during the pandemic. These findings will be used to inform investor protection and education efforts related to the ongoing pandemic and economic recovery.
Visit GetSmarterAboutMoney.ca for helpful resources about your finances and investments during the pandemic.
The mandate of the OSC is to provide protection to investors from unfair, improper or fraudulent practices, to foster fair and efficient capital markets and confidence in the capital markets, and to contribute to the stability of the financial system and the reduction of systemic risk. Investors are urged to check the registration of any persons or company offering an investment opportunity and to review the OSC investor materials available at http://www.osc.ca.