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new to direct investing? part 2

Gail Bebee is a Personal Finance Author and Speaker.Tory Zimmerman/The Globe and Mail

Gail Bebee is the author of No Hype - The Straight Goods on Investing Your Money. She can be reached at; her website is This is part two of a 12-part series for people that are new to investing on their own.

There are many reasons why rookie direct investors fail - life gets in the way, lack of interest, overwhelmed by too much information, fear of anything involving math, difficulty learning the investing basics, frustration with the online purchase process, fear of failure, not developing and following a basic investing plan.

These are just a few that come to mind. If any of these reasons (or are they excuses?) sound familiar, you may be a candidate for what I call the all-in-one investment solution. It is possible to purchase just one investment product to meet your investing needs once you've decided on your investing goals and tolerance for risk.

New to direct investing? The series

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All-in-one mutual funds hold both equities and fixed income under one roof. You'll find these in the growth and income asset classes. The Mawer Canadian Diversified Investment Fund is a good choice in this category because of consistent above-average return rates and a relatively low management expense ratio (MER) of 1.02 per cent. Its objective is high long-term, after tax rates for non-registered accounts. As such, it would suit investors with longer-term investing goals and the appetite for some volatility in returns. The holdings are about 60 per cent stocks and 40 per cent bonds and cash, a classic balanced approach. Canadian, U.S. and international companies are part of the equity mix.

The Mawer Canadian Balanced Retirement Savings Fund, as its name implies, is designed for RRSP accounts. Its focus is capital preservation and long-term growth at moderate risk. Again, we find a combination of reasonable fees (management expense ratio of 1.03 per cent) and above-average long-term return rates. The fund is actually comprised of seven other Mawer funds ranging from money market and bonds to U.S., Canadian and global equities. Both Mawer funds require a minimum investment of $5,000.

The monthly income funds offered by several major banks are potential all-in-one investing solutions for retirees and others seeking a regular income stream and capital preservation. While the fund name and objectives may be similar, the holdings, management fees and return rates can vary significantly, so you need to choose carefully. The current percentage of stocks held within the RBC , BMO , TD and CIBC Monthly Income funds are 44 per cent, 48 per cent, 64 per cent and 65 per cent, respectively. The MERs range from 1.14 per cent to 1.49 per cent and the five-year return rates range from 4.92 to 6.46 per cent. You can get started with a $100 investment in the TD Monthly Income. For the other three, you'll need $500.

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iShares, the major player in the rapidly growing Exchange Traded Funds (ETF) category, recently launched two new ETFs, which are worthy competitors to all-in-one mutual funds. The Conservative Core Portfolio Builder Fund has similar objectives to the above monthly income funds. The Growth Core Portfolio Builder ETF is focused on long-term capital growth and targets investors who don't need their money any time soon and have some tolerance for risk.

Claymore Investments, another Canadian ETF player, sells two ETFs comparable to the iShares portfolio offerings: the Balanced Income CorePortfolio ETF and the Balanced Growth CorePortfolio ETF . What sets Claymore apart from iShares are its Dividend Reinvestment (DRIP) and Pre-Authorized Cash Contribution (PCC) Plans. The DRIP lets you automatically reinvest dividends from Claymore shares and the PCC allows you to buy more shares on a regular (monthly, quarterly or annual) basis, both without paying any commissions. The result is very cost-efficient investing, particularly if you invest regularly. Note that these plans are not offered by all direct investing brokers.

Portfolio ETFs are constructed from other ETFs that invest in specific assets such as Canadian and international equities, bonds, real estate, etc. The track record for these new portfolio ETFs is short. However, the MERs (about 40 to 60 per cent lower than the aforementioned mutual funds) and the respectable return rates of the underlying ETFs mark these products as promising all-in-one investments. As ETFs are bought on a stock exchange, you'll need enough cash to buy 100 shares at the prevailing price.

While not for everyone, all-in-one investment products offer a simple way to achieve adequate diversification and professional money management. As the table below shows, these funds have performed decently compared to standard indices of stocks or bonds. They could be the answer for direct investors who are time pressed, have real difficulty making investment decisions, are not overly interested in investing, or have a small amount of money to invest. If you are planning to go the all-in-one investment route, take the time to determine your investing goals, know your tolerance for risk and do your homework so you make the right decision for your personal situation.

All-in-one Investment Ideas

1 Year Av, %

3 Year Avg, %

5 Year Avg, %

10 Year Avg, %



Minimum Investment

Mawer Canadian Diversified Investment Fund







Mawer Canadian Balanced RSP Fund







BMO Monthly Income Fund







CIBC Monthly Income Fund







RBC Monthly Income Fund







TD Monthly Income Fund







iShares Conservative Core Portfolio Builder ETF (XCR)






about $2200

iShares Growth Core Portfolio Builder ETF (XGR)






about $2200

Claymore Balanced Income CorePortfolio ETF (CBD)






about $1700

Claymore Balanced Growth CorePortfolio ETF (CBN)






about $1500

Globe Canadian Fixed Income Peer Index







S&P/TSX 60 Index (Canadian equities)







S&P 500 Total Return Index, $Cdn (U.S. equities)







MSCI World Index, $Cdn (global equities)







* as of August 31, 2009