Simple all-in-one investing solutions
I don’t believe in one-size-fits-all financial planning but there are some simple, one-stop-investing solutions to consider for your portfolio. Have a look at these all-in-one products and let me know what you think.
Steadyhand Founders Fund
Fast facts at time of post:
- Progressively lower management fees with assets under management:
- Less than $10,000 = 1.34%
- At $150,000 = 1.25%
- For $250,000 = 1.18%
- With deep pockets (>$250,000) = “Even less”
- One of Steadyhand’s flagship funds.
- Involves a wrapped-fund structure, a “fund of funds” if you will.
The last time I checked this fund structure, it has the following breakdown:
- 60% equities
- 24% bonds
- 16% cash and short-term money market securities.
- There is a healthy dose of home bias and a good mix of overseas content in this fund, although I was surprised there is only 18% U.S. content (which seems low to me given the number of multinationals parked in the U.S. that now derive most of their income from around the world).
My take:
This is a reputable all-in-one portfolio solution from a respected provider. If you have a long-term investing horizon, a conservative investing risk tolerance, and never want to worry about your own asset allocation decisions – consider this one.
Mawer Balanced Fund
Fast facts at time of post:
- One of the more established balanced funds available, fund inception 1998.
- Management expense ratio = 0.94%.
- “The Fund invests in Canadian, U.S., and International equity securities, as well as bonds and other funds managed by Mawer that invest in debentures of government and corporate issues or in those securities directly.”
- Another fund of funds example, comprised of Mawer funds.
My take:
It’s hard to go wrong with this product. This fund has a great long-term track record of solid performance. 10-year performance (at time of this article) is close to 8%, and that’s living through The Great Recession.
TD Balanced Index Fund
Fast facts at time of post:
- “The fundamental investment objective is to maximize long- term growth while seeking to preserve capital by investing in a balanced portfolio of equities, bonds and short-term instruments, primarily Canadian, but also including U.S. and international securities.”
- One-stop exposure to a suite of low-cost TD index funds.
- Management expense (MER) ratio = 0.89%.
- High concentration of Canadian bonds ~50%, low U.S. exposure <10%.
- Minimum investments start at $100.
- Minimum pre-authorized investments start at just $25.
My take:
For new or conservative investors, this is a good product. Although long-term performance to date is not as stellar as the other two solutions above, you have one of the lowest MERs in this space.
Tangerine Equity Growth Portfolio
Fast facts at time of post:
- “The Canadian equity component seeks to replicate the S&P/TSX 60 Index; the U.S. equity component seeks to replicate the S&P 500 Index; and the international equity component seeks to replicate the MSCI EAFE (Europe, Australasia and Far East) Index.” – plain vanilla.
- Management expense (MER) ratio = 1.07%.
- Quarterly rebalancing is included in this product, so your investments remain aligned to the original targets set by Tangerine.
My take:
Like the TD Balanced Index Fund, for new investors, this is a nice one-stop-shop. Although long-term performance is always to be determined, you should have some confidence that your investments are diversified as you keep your hands off the investment steering wheel for a modest fee.
A summary of balanced funds in general
I don’t invest in them myself and I have no affiliation with any of these firms but I can see the benefits for new or conservative investors – for disclosure. Balanced funds provide some behavourial benefits to consider – things I struggled with many years ago. Such funds help shield investors from their own bad behaviour related to owning higher priced products for too long, trying to time the market, and lack of diversification beyond Canada. By packaging a mix of stocks and bonds and various geographies into an all-in-one investing solution, investors should expect simplicity, a smooth upward trend in their portfolio value over time and a quieter ride when markets turn choppy.
Do you invest in balanced funds? Have you considered them at any point in time?
I have been educating myself about investing and was planning to move our high cost mutual funds (about $500K) into an ETF couch potato portfolio. But after reading this article and comparing the returns on the
balanced ETF Vanguard portfolio, I’m thinking I’d be better off investing in the Mawer balanced, which looks to have better returns and is far easier than setting up a DIY ETF account. Or am I missing something? Is the 8% return on the Mawer fund after paying the 1% MER?
Corinne, performance total returns such as those I linked earlier from Morningstar are always post fees.
The Mawer Balanced is a solid one-stop investing solution. I cannot advise you how you invest, nor can I predict future returns of anything Corinne, however – when you see returns of ETFs, funds, etc. – they are almost always after money management fees are paid.
These “balanced funds” are not comparable. TD Balanced Index is 45-50% income; Tangerine Equity Growth is all equities. There are many more issues. All said, Mawer is the only acceptable balanced fund here.
Thanks JJ. Mawer has a great product and further to my post, hard to go wrong with such great history on its side.
Hi Mark,
What’s your take on XWD as an all in one solution for the equity portion of a portfolio?
It’s a pretty good fund for an all-in-one equity solution. I recall it’s like 60/40 US and International with a sprinkle of Canada (using XIU). You can hold it in your RRSP, TFSA, etc. for about 0.46% MER.
For my portfolio I own many Canadian stocks (for dividends) + VTI + VXUS (for long-term growth).
Thanks for reading.
Thanks for the data Bernie. I still think over long investing periods, XWD (not XMD) is a good product.
A lot of these funds are very expensive. Some of my Canadian readers have talked to me about how great the Mawer Funds have done for them over time however.
Not sure I have heard about the rest.
I was wondering, can’t someone from Canada simply purchase a Vanguard Balanced fund from the US for example? Or is the tax situation pretty messy?
I don’t feel 1% is too bad, given most folks in Canada for many mutual funds are likely paying double that. I know I was many years ago.
Mawer have some good products.
Someone from Canada can buy a Vanguard Balanced Fund (such as VTMFX) however there are some tax implications in doing so. You need to be careful what account you hold this fund in:
https://www.myownadvisor.ca/indexing/
“A US ETF that holds US stocks
example: Vanguard VTI. Disclosure: I own this ETF.
This ETF makes the most sense in an RRSP because U.S. listed ETFs like VTI held inside an RRSP escape withholding taxes of 15%. It’s worth reminding you foreign dividends are taxed at your marginal rate. With U.S. listed ETFs the Internal Revenue Service will take a 15% withholding tax on all dividends received.
The other key point is that Canada has tax treaties with the US and many other countries. Those tax treaties waive withholding taxes on U.S. stocks or U.S. ETFs in registered accounts like RRSPs, RRIFs and Locked-In Retirement Accounts (LIRAs). TFSAs don’t apply to these tax treaties, it is not considered a retirement account (even though I do). In a TFSA you must pay 15% withholding taxes on a U.S. ETF like VTI or U.S. stocks like Coca-Cola.”
Mark,
Are you sure about being able to purchase an American based mutual fund in Canada? I’ve head this is not possible.
What I find interesting is outside of the past year Mawer Balanced Fund (MAW104) with it’s 0.94% MER has beaten Vanguard Tax-Managed Balanced Fund (VTMFX) with it’s 0.11% MER in total return performance through all time frames and since inception of the Vanguard fund in late 1996. Mawer Balanced Fund, which originated in early 1988, has massively outperformed the equivalent low fee couch potato ETF mixes.
I don’t believe Canadians can buy U.S. mutual funds. Theoretically, yes. Practical terms, no. I could be wrong.
I suspect although I don’t know for sure Bernie, it likely have to do with the “pooled” structure of mutual funds themselves….and currency exchange and tax consequences with that. It could be a barrier to entry as well though…i.e., the Canadian strangle-hold on mutual funds.
Mawer has some great funds, no doubt 🙂
Thanks for the helpful article.
I am using Mawer Tax Effective Balanced Fund (MAW105) for my non-registered account.
Thanks for reading. Mawer has some good funds with good track records.
Not everyone is cut out to be their own financial advisor and would do well to avail themselves of professional advice or a good balanced fund. I’d be willing to bet a medium double/double and a donut at Tim’s that there are a lot of people that have done better not being a DIYer.
Well said Lloyd. I think some of these products are essentially a financial advisor, all fees, wrapped into one product.
Yeah, I guess there will always be a constituency of “new or conservative investors” for the financial sector to gouge.
If you don’t want to DIY or educate yourself, then you’ll always end up paying more, one way or another. So the world goes.
Well, paying 1% is MUCH better than paying 2%+! Yes, if you don’t want to educate yourself you will likely always pay more….as you say…so the world goes.
And there are plenty of similar/comparable funds available with MERs of 0.3% or less (e.g. http://canadiancouchpotato.com/recommended-funds/).
Are the listed funds worth paying 3-4 times the fees? Do they amplify the returns or reduce the risks by 300-400%?
If not (and they don’t), then you’ll make/save more money buying the less expensive option.
You don’t have to be a DIYer to shop around for the best deal (using very simple criteria). Most people probably spend more time shopping for a new BBQ or cable package or dress.
I have no issue with many of Dan’s selections but some folks don’t want to buy ETFs, hold multiple ETFs, and struggle with how to re-balance ETFs. The TD e-series funds are good products.
Low fees aren’t everything when it comes to investing. You make a few silly moves with these ETFs and you immediately forgo any savings associated with lower fees.
That said, I prefer the lowest-possible options and I’m slowly re-structuring my portfolio this way.
Most people put more effort into dinner plans than investing 🙂
Our grand daughter just took over the Joint Trust BNS DRIP which is valued around $12,000. She plans to contribute between $25 to $100 a month periodically. Currently she pays no fees on her investment, can contribute additional monies at no cost and her dividends are fully reinvested to buy more shares. Her yield on investment is 5.67% and her dividends have risen regularly.
Would we\did we recommend she consider a Balanced Fund or any other type of fund or ETF, No! I think her risk of owning just one stock is not a problem, even if she never buys another.
Great stuff Cannew. We also bought bank stocks for some of our nieces and nephews. I am optimistic if they never touch the capital and let dividends accumulate, contributing $25+ per month, in another 50 years they will be quite wealthy from it.
I think balanced funds have their place but for disclosure – I wouldn’t own them because I prefer more hands on and DIY.