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gordon pape

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Stock markets have been holding up surprisingly well but that hasn't stopped a lot of people from fretting about possible troubles ahead.

No wonder. They say that markets always climb a wall of worry and there's plenty of that around right now. Growth estimates are being reduced, both in Canada and elsewhere. World trade is slowing. The early effects of Brexit are starting to be felt in the United Kingdom. Wallonia has undercut our trade deal with Europe (Wallonia? Really?). Then there's Donald Trump. If you're not feeling a little uneasy, you're not paying attention.

Of course, you could always sell everything and keep your money in a bank account but that will earn you almost nothing in today's low-interest-rate environment. Here's an alternative suggestion: two mutual funds that are designed with the nervous investor in mind.

TD Advantage Balanced Income Portfolio

Background: This is a conservatively managed, balanced portfolio that invests in the units of other TD funds. It is best suited to low-risk investors who are prepared to sacrifice some growth potential for a higher degree of safety.

Fund performance: The results are in line with the fund's mandate. It returned 5.56 per cent over the year to Sept. 30, slightly below average for the category. However, over the three years to that date, the average annual return of 6.11 per cent is slightly ahead of the peer group.

Distributions: The fund pays very small quarterly distributions (often less than a penny per unit) plus a year-end capital gains payment. It is not suitable for investors who require regular cash flow.

Key metrics: About 60 per cent of the assets are invested in the TD Canadian Core Plus Bond Fund, with the rest spread among various equity funds. The fund has an MER of 1.95 per cent and the minimum initial investment is $2,000.

Analysis: The fund has never posted a losing calendar year since it was launched in 2009 and the large bond weighting will continue to provide a cushion when stock markets decline. That doesn't mean the fund is risk-free but any damage in a downturn should be nominal.

Outlook: More of the same, with returns in the 4 to 6 per cent range. This is a stable portfolio that provides some growth potential with minimal risk.

Steadyhand Founders Fund

Background: This is a portfolio fund that invests in the five funds offered by the small Vancouver-based Steadyhand boutique house. Company founder and CEO Tom Bradley determines the composition of the portfolio, using a tactical asset allocation approach.

Fund performance: Over the year to Sept. 30, the fund gained 7.21 per cent, almost exactly the same as the category average. The three-year average annual compound rate of return was 6.82 per cent, which was 31 basis points better than the average.

Distributions: The units distribute 4.5 cents every quarter plus there is a year-end capital gains payment in December.

Key metrics: This is a small fund, with about $289-million in assets under management. The MER is a very reasonable 1.34 per cent. You'll need a minimum initial investment of $10,000 to take a position. The fund is not available to investors in the territories or in provinces east of Ontario.

Analysis: Steadyhand has built its reputation on low fees and a conservative style. The fund holds a mix of 24 per cent bonds, 16 per cent cash, and 60 per cent stocks. Mr. Bradley is one of most intellectual and respected managers around.

Outlook: I expect this fund to continue to deliver returns in the 5 per cent to 7 per cent range.

Ask your financial adviser if either of these funds is suitable for your portfolio.

Disclosure: The author owns units in the Steadyhand Founders Fund.

Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters. For more information and details on how to subscribe, go to buildingwealth.ca.

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