In the August edition of The Informed Investor, we take a look at recent Canadian spending trends, housing market developments and at what homeownership can to teach us about investing.

Whether working, looking for work, or entertaining ourselves after returning from work, we’ve spent much more time at home since the pandemic began. So it makes sense that many of us started spending more of our money making our homes more comfortable. That may have meant buying plants, pillows, exercise equipment, or even moving in to a new place.

Over the course of the pandemic, RBC Economics’ COVID Consumer Spending Tracker¹ highlighted higher spending by Canadians in the “Comforts of home” category. In contrast, “Entertainment, Arts and Movie” spending remained low, but picked up sharply in July as more out-of-home entertainment became available across the country.

In regards to the general economy, RBC Economics reported that the Bank of Canada revised its global and domestic growth forecasts higher². These revisions were based on increased financial stimulus in the US as well as expectations of higher consumer spending.

RBC Economics’ July housing report³ noted that home sale prices have continued to increase across Canada, supported by strong demand from buyers with changing housing needs, limited housing supply and historically low mortgage rates. The same report noted that the Home Price Index (HPI) for Canada rose 0.9% from May and is now 24.4% higher from June of last year.

Like the market prices of our investments, home prices can be volatile. Yet homeowners are usually much less concerned than investors with day-to-day or even year-to-year price fluctuations.

Part of this is due to lack of data. Data on home prices is somewhat limited by the home sales taking place in the real estate market. It’s likely that many Canadian homeowners are aware that home prices are increasing, but it’s harder for them to say how much their specific home is worth or what it would end up selling for.

People also tend to approach homeownership as a long-term investment. They buy homes to live in, to raise families in, to entertain in. They continue to invest in their homes with additions, upgrades, and maintenance spending. They need homes, so even if they could be certain of the price of their home on any given day, most aren’t prompted to sell even after large movements in home prices.

Just as homeowners need somewhere to live, investors need somewhere their money can grow over time. However, unlike home prices, financial markets make it easy to determine the price of investments on any given day (and often at any given moment throughout the day). This distinction should not prohibit investors from behaving like homeowners.

The same principals of homeownership can and should be applied to investing. A diversified portfolio of stocks and bonds has historically been one of the best places to grow your savings over time, and investors can make additions to their investments through regular pre-authorized contributions. Small and consistent contributions, made regardless of short-term volatility, can have a profound impact on your financial future much like small improvements to your home can add significant value to your property over time.

At RBC InvestEase, our job is to make that home as comfortable as possible for you by matching you with a portfolio of investments according to your financial goals and risk preferences and then managing that portfolio for you. When you have that level of comfort with your investments, it’s a lot easier to maintain the long-term mindset that’s key to investing success.