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Resisting the temptation of high-risk, high-return investments is a constant challenge for investors.

I was reminded of this in reading a recent query from a dad who is taking charge of his children’s registered education savings plans. He’s looking at using exchange-traded funds, which makes good sense because they’re excellent building blocks for RESPs and pretty much every other investing purpose. There are hundreds of ETFs listed on the Toronto Stock Exchange, but this reader has whittled his choice down to two.

“I have been thinking about CYBR or something like VBAL,” he wrote. “What would you suggest?”

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I suggest this reader take a hard look at VBAL, the Vanguard Balanced ETF Portfolio. VBAL is what’s known as a balanced, or asset-allocation, ETF. That means a fully diversified portfolio in a single fund built with other ETFs in the Vanguard family. This reader said his kids are 8 and 11; VBAL’s mix of 60-per-cent stocks and 40-per-cent bonds makes sense for beneficiaries who won’t need money from the RESP for at least seven years.

Now for CYBR, the Evolve Cyber Security Index Fund. This is a specialty fund that has produced an excellent return of almost 29 per cent for the year through Nov. 27. VBAL’s most recent results are to Oct. 31 – returns for the year to that date came in at 12.2 per cent.

You can see why it might be tempting to push the limits on risk and go with CYBR, even for a fairly conservative purpose such as saving for your children’s education. Big returns in an RESP can make it a lot easier to fund a child’s postsecondary education.

Resist the temptation. CBYR has done well for investors, but its huge gains this year suggest the potential for volatility. Speculative investments such as this would be hit hard in a stock-market correction, while VBAL’s losses would be limited by both its diversified stock-market exposure and its substantial bond holdings.

Arguably, even VBAL might be on the aggressive side for this reader’s RESP. Some investment pros think 10 years is the minimum time frame for stock-market investing. One way to tamp down risk levels would be to use a conservative balanced ETF such as the Vanguard Conservative ETF Portfolio (VCNS). The mix here is 40 per cent stocks, 60 per cent bonds.

Returns from both VBAL and VCNS will likely be modest in the years ahead – quite possibly in the mid-single digits at best. CYBR might do better, but it could also do a lot worse. That’s not a bet to make with the investments you’re using to pay for your children’s college or university.

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