Two kinds of fear torment today's investors: Fear of falling stock markets, and fear of missing out on future gains.
A single low-cost mutual fund takes care of both, to a limited extent. The fund is Beutel Goodman Canadian Equity-D, and it's worth a look if you're a long-term investor seeking a vehicle that will give you your fair share of gains in good markets and while playing comparatively good defence in down markets.
Growing concern that the stock markets will correct after a monster rally over the past five or so years prompted me to look recently into which Canadian equity funds held up best in the killer bear market of 2008. Among the best of the widely available, reasonably priced funds that I found was Beutel Goodman Equity D. While the S&P/TSX composite lost about 33 per cent in 2008 on a total return basis, this fund fell 23 per cent. In 2011, the index fell 10 per cent and Beutel Goodman Equity D dropped 7 per cent. Past results are no sure indicator of what's ahead, but this fund does seem to have offered a lower-drama ownership experience than almost all of its Canadian equity fund peers (including exchange-traded funds).
Beutel Goodman is a low-key, $30-billion firm that specializes in running money for pension funds, endowments, foundations, insurance companies and governments. The firm describes itself as seeking investments that provide "a margin of safety in weak financial markets," and as trying to "build wealth over the long term by preserving capital and mitigating downside risk." This would be generic verbiage coming from most fund companies. Here, these claims are backed up with actual numbers.
As with the index, Beutel Goodman Canadian Equity D's biggest sector weighting is financials. But it has much less of a skew to resources than the index, and more in sectors like consumer discretionary, telecom and industrials. It's a more conservative mix than the index, though certainly vulnerable to market pullbacks.
The management expense ratio of 1.38 per cent for Beutel Goodman Canadian Equity D is reasonable in light of long-term returns. The fund has surpassed the S&P/TSX composite index over the 5- 10-, 15- and 20-year periods of June 30, but has lagged the index in the past year or so. Are you afraid to invest, and afraid not to? This fund may be the answer.
Rob Carrick