One of the country's largest mutual fund companies has decided it's time for investors to stop coddling themselves.
Despite a 33-per-cent stock market surge last year, many investors continue to shelter their money in money-market funds, savings accounts and other products that offer safety yet negligible returns. Dynamic Funds has decided that if it takes some tough love to get investors back into the stock markets, so be it.
"Diversification doesn't mean putting money under a mattress and in a coffee can," Dynamic says in an ad campaign it's been running online. "Get your money back into a real investment."
In another ad, Dynamic tells readers that diversifying is not the same thing as hiding money in different places. It then goes on to list sock drawers, cookie jars and mattresses as examples of where people are hiding their cash.
Individual advisers and strategists have been talking for months about the need for investors to venture out of safe investments that pay as little as zero and not much more than 1 per cent in many cases. But with the annual selling season for registered retirement savings plans and tax-free savings accounts under way, Dynamic's campaign signals a more aggressive approach is being taken.
"This is a little edgier than we have been in the past," said Jordy Chilcott, executive vice-president at Dynamic Funds. "It's tongue-in-cheek - hopefully we'll get a smile out of someone and drive them to have a conversation with their adviser."
Mr. Chilcott said the message of his firm's campaign is for investors to start participating in the market again.
Are they listening?
Dynamic led the mutual fund industry in overall net sales last month with $626-million, which Mr. Chilcott said is close to the robust levels of 2007. But investors are for the most part tiptoeing into the market through balanced funds - a mix of stocks and bonds - rather than jumping in with pure equity funds.
Three balanced funds, a bond fund and a single equity fund made up its most popular sellers in January, he said.
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Getting people to move at least some of their money out of safe but unproductive investments serves the interest of both investors and the investment industry. Many people won't earn enough to retire comfortably using money market funds and savings accounts, and investment companies earn more from balanced and equity funds than they do from bond and money market funds.
The safety-first mindset is tenacious, though.
"People are still pretty conservative for sure," said Steve Geist, president of the mutual fund arm of the Canadian Imperial Bank of Commerce. "You hear of some surveys out there where people are saying 'I'm going to do nothing this RRSP season.' "
Mr. Geist reports that most of the money flowing into his company these days is headed for bond funds and mutual fund bundles with heavy helpings of bonds. The newest product innovation from this Top Five fund industry player? What else, but a bond fund.
The Renaissance Corporate Bond Capital Yield Fund offers higher returns than a conventional bond fund by focusing on bonds issued by companies rather than governments. In non-registered accounts, it further enhances returns through a derivatives strategy that turns bond interest into capital gains, which are taxed much more lightly.
Where once the fund industry would pop out a new kind of equity fund to jazz up its lineup, now more conservative fodder is the rule.
