Conservative and aggressive mutual-fund picks for your RRSP

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The global market selloff has been brutal, but the silver lining is bargains for investors with available cash.

For those who find stock gyrations too nerve-racking, equity mutual funds can be a more soothing alternative. These funds invest in a basket of stocks, providing instant diversification. Money managers can raise cash, which provides a cushion in rocky markets as well as dry powder for bargain hunting. And funds can be purchased for as little as $500, making it easy for novice investors to enter the market.

Be mindful of fees, however, because they can eat away at returns. Some funds charge less for investors who don't use a financial adviser.

We asked three analysts for their top conservative and aggressive equity fund picks for a registered retirement savings plan (RRSP).

Dan Hallett, director of asset management at HighView Financial Group in Windsor, Ont.

• Conservative pick: BMO Global Dividend Advisor Series
• Type: Global equity
• Management expense ratio (MER): 2.38 per cent
• Minimum investment: $500
• Three- and five-year annualized returns to Jan. 31: 18.4 per cent, 12.54 per cent

This global dividend fund invests in companies with increasing payouts rather than high-yielding stocks, says Mr. Hallett. "It's a good core holding that won't shoot the lights out in good times but has a history of losing less than most in tougher markets," he says.

Sri Iyer, who heads Guardian Capital LP's quantitative strategy team, has overseen the fund since 2012. Holdings include Starbucks Corp., Apple Inc. and AT&T Inc. The fund has little or no emerging-market exposure. The higher-fee A series is sold by commission-based financial advisers. The lower-fee D series version, which is sold through discount brokers, and the similarly run Horizons Active Global Dividend ETF (HAZ-TSX) are better for do-it-yourself investors, Mr. Hallett says.

• Aggressive pick: Dynamic Power Global Growth Class Series A
• Type: Global equity
• MER: 2.52 per cent
• Minimum investment: $500
• Three- and five-year annualized returns to Jan. 31: 21.28 per cent, 12.14 per cent

Fund manager Noah Blackstein invests in businesses with lots of growth potential, but "many aren't household names," says Mr. Hallett. "Alphabet [formerly Google] is in this fund, but he participated in its initial public offering at a fraction of today's price."

Mr. Blackstein, who is with 1832 Asset Management, runs a concentrated portfolio whose stocks include Ctrip.com International Ltd., NetEase Inc. and EPAM Systems Inc. "The [fund's] past performance is impressive, outpacing the MSCI World index by nearly four percentage points per year since the fund's inception 15 years ago," Mr. Hallett says. "But this fund isn't for the faint-of-heart. It is volatile … and will challenge the temperament of many investors."

James Gauthier, head of investment fund research at HollisWealth in Toronto

• Conservative pick: Mackenzie Ivy Foreign Equity Series A
• Type: Global equity
• MER: 2.51 per cent
• Minimum investment: $500
• Three- and five-year annualized returns to Jan. 31: 16.23 per cent, 12.82 per cent

This global fund has delivered solid returns compared with its peers but with far less volatility than the market, says Mr. Gauthier. The fund, which is about 40 per cent invested in the United States, recently had 30 per cent in cash.

Paul Musson, a veteran manager with Mackenzie Investments, heads the team running the fund. "He has done a great job on this portfolio for more than a decade," but don't expect outsized returns when the market is very bullish, Mr. Gauthier says. The team looks for stocks trading at attractive valuations but "will not buy a stock simply because it is cheap," he notes. "The business itself must be strong." Holdings include Omnicom Group Inc., Procter & Gamble Co. and Danone SA.

• Aggressive pick: Trimark Global Endeavour Series A
• Type: Global equity
• MER: 2.64 per cent
• Minimum investment: $500
• Three- and five-year annualized returns to Jan. 31: 17.64 per cent, 14.38 per cent

Unlike its peers that have a bias toward larger companies, this fund buys mostly mid-sized global firms that have greater growth prospects, says Mr. Gauthier. Jeff Hyrich, a portfolio manager with Invesco Canada, has overseen the fund since 2007. He aims to invest in companies with strong management teams that are leaders in their industries and whose stocks are attractively priced.

The portfolio recently held about 35 names. Half of the fund's exposure to emerging-market currencies is hedged back into Canadian dollars. The fund, which is 34-per-cent invested in the United States, recently held 13 per cent in cash. Holdings include Ross Stores Inc., Anthem Inc. and Hyundai Mobis Co. Ltd.

Dave Paterson, fund analyst with D.A. Paterson & Associates Inc. in Toronto

• Conservative pick: Manulife Dividend Income Fund
• Type: Canadian dividend and income equity
• MER: 2.33 per cent
• Minimum investment: $500
• Three-year annualized return to Jan. 31: 12.06 per cent

This fund, which owns mostly Canadian dividend-paying stocks, is a solid choice for investors seeking a less volatile way to get equity exposure, says Mr. Paterson. The portfolio was launched three years ago, but the team at Manulife Asset Management Ltd. has run a similar mandate for institutional investors since 2004.

"The returns [of the latter] have outpaced the S&P/TSX composite index but with lower levels of volatility, and much stronger downside protection," he notes. The mutual fund, which can invest in any size company, is underweight financials compared with some Canadian dividend funds. Recent holdings have included Brookfield Property Partners LP, Enbridge Inc. and Loblaw Cos. Ltd.

• Aggressive pick: Mawer Global Equity Series A
• Type: Global equity
• MER: 1.41 per cent
• Minimum investment: $5,000
• Three- and five-year annualized return to Jan. 31: 19.96 per cent, 16.26 per cent

This fund would be suitable for investors who can tolerate some volatility, but it has also fared well in down markets, says Mr. Paterson. Over the past three years, the fund has been in the top 5 per cent of its peer group, he noted. It is managed by Paul Moroz and Jim Hall of Mawer Investment Management.

The duo look for companies with strong management and competitive advantages and whose stocks trade at reasonable prices. Holdings include Wells Fargo & Co., Roche Holding AG and China Mobile Ltd. This lower-fee fund can be purchased through discount brokers or directly from Mawer. The similarly run Manulife Global Equity Fund sold by advisers charges a 2.47-per-cent fee but has a $500 minimum investment.

Correction: An earlier version of this story said the management expense ratio for the Manulife Global Equity Fund was 2.7 per cent. In fact it is 2.47 per cent.