The stock market decline last week reminds us of the benefits of not having all your retirement savings in stocks.
Bonds were more or less flat during the market rout, which means diversified investors had some stability amidst the panic selling. Want to buy this diversification in one easy step? A time-tested balanced mutual fund is one option. Let's take a look at a few of balanced funds that came up using a screening process that started with Canadian and global balanced funds with either a tilt toward stocks and a more or less equal balance of the two. From there, the list was pared down by excluding funds with a management expense ratio above 1.35 per cent and those with high minimum investments or limited availability (the funds listed below should be available from a range of online brokerage firms).
Some notable names that made it through the screening process:
Beutel Goodman Balanced D: Roughly two-thirds of this fund is in stocks, so it's fairly aggressive in its approach. Has consistently outperformed its peer average in the near and long term. The five-year annualized gain to Jan.31 was 8.7 per cent, a credit to Beutel's team of institutional money managers and a low MER of 1.2 per cent. Minimum investment: $5,000 upfront, $100 subsequent.
Mawer Balanced Series A: The MER for this fund industry stalwart (it dates back to 1988) is a bargain at 0.94 per cent. About 60 per cent of the portfolio is in stocks, with the rest in bonds and cash. Returns have beat the average for its peer group consistently over the short and long term. Five-year annualized returns to Jan. 31 were 10.8 per cent. Minimum investment: $5,000 upfront, no minimum for subsequent investments. (Full disclosure: I invest this fund)
PH&N Balanced D: A notably low MER of 0.88 per cent has helped this well-established fund produce a five-year annualized gain of 9.1 per cent. Holds a mix of PH&N and RBC mutual funds (PH&N is RBC-owned), with roughly two-thirds of assets in the stock market. Minimum investment: $500 upfront, $25 subsequent.
Steadyhand Founders Series A: Holds other Steadyhand funds, with a reasonable all-in MER of 1.34 per cent. A little over half the portfolio is in stocks, which means it's a bit more conservative than some others on this list. Five-year annualized returns come in at 7.3 per cent, which compares to 6 per cent for the category average. Minimum investment: $10,000 upfront, $1,000 subsequent. You can buy directly from Steadyhand.
Balanced mutual funds, even the comparatively cheap ones shown here, are more expensive to own than exchange traded funds. However, these balanced funds nicely accommodate investors who want to make regular contributions to their RRSP and don't want to pay any commissions to do so. If you're looking for low-cost balanced ETFs, check out this recent column I wrote on some new products that just became available.