The Certified General Accountants of Canada (CGA) released a study today showing a trend by Canadians toward investing in riskier assets, leaving them more prone to market fluctuations and financial stress.
The study reveals a steady decline in investments by Canadians in ‘safe’ assets over the past 20 years. For example, stocks and mutual funds accounted for 19.2% of all household assets in 2009 – more than double that of 1990. Low-risk investments, such as cash and deposits, accounted for 12.3% of household assets compared to 18% two decades ago.
Canadians are living dangerously on credit, more so than their counterparts in other OECD countries. According to CGA study highlights published in today’s Financial Post, Canada ranked number one among 20 OECD nations with regards to debt-to-financial assets ratios. The Slovak Republic placed second – followed by Greece. The United States came in fourth.
A study finding noted by the Wall Street Journal estimates that approximately 39% of total household assets in Canada are potentially sensitive to a correction in the real-estate market.
It’s a warning to Canadians that, despite signs that the recession is behind us, now is not the time to take on more debt than we can afford.
Before becoming a homeowner, consider how much you can afford to pay each month. Consider locking in your mortgage rate if you cannot afford even a small increase in your monthly payments. With interest rates almost guaranteed to rise in the next year, avoid using unsecured credit to make a down payment on a home; otherwise, you might be writing the ideal recipe for a personal debt crisis.
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