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BMO had to respond to iShares for the simple reason BMO is 2nd largest in Canada in terms of AUM and have been chipping away at iShares lead. They cannot be left behind in this horse race.
 

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I know that many of us have ETF or individual stock portfolios, but friends and family frequently ask me about simpler fund options. This might be the kind of thing suitable for a retiree or someone wanting to build savings without spending too much time managing the portfolio themselves. Maybe we can list some good, generic balanced funds we're aware of. Some criteria:

- single fund
- around 50/50 or 60/40 asset allocation
- low MER
- diversified with Canada plus foreign exposure
- diversified sector exposure (not very heavy in a specific sector)
- ideally, a long track record

Different brokerages will give access to different funds, and different minimum purchase amounts apply, so I think it's useful to list several options.
This type of fund would have both positives & negatives. A big negative I see if one asset class goes to zero balancing would wipe the fund out. The more asset classes the greater the chance of an asset going to zero.

Like a poker game every table is the same the money flows to the strong hand or hands the majority will lose a balanced fund is no different
 

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And BMO's new portfolio ETFs are priced at 5 basis points under the competition... They sure know how to enter the market!
 

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Discussion Starter #44
PH&N Balanced D Series (PHN350 or RBF1350) and I think those two codes refer to the same fund. MER is only 0.88%. This is also Canadian heavy but still diversified with 29% Canada, 16% US, 14% international. 15 year performance is good, very similar to the BMO one overall in allocation and performance.
This PH&N Balanced Fund (D Series) consistently shows excellent performance. It also allows a small initial $500 purchase, which is very nice.

The morningstar page shows it as "High" risk versus category. Does anyone know why? Looks like a standard 60/40 allocation to me.
 

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Discussion Starter #46 (Edited)
BMO Monthly Income, Series D (GGF31148)
MER 1.02%. Allocation is 32% Canada, 26% foreign. This is a newer low cost series so you can look at performance of the parent fund and add +0.55% cagr return due to MER drop. That puts 10 year return at 5.63% cagr and 15 year return at 6.52% cagr. Available through TDDI.
I recently helped a family member calculate some performance stats on their own "balanced" ETF portfolio. It was an interesting experience that reminded me of the added value of mutual funds and professional management. Their start date was late 2007, immediately before the market crash. Worst possible entry.

This person held various ETFs, vaguely 60/40. However (as many of us have done) this person avoided regular bond funds out of fear of rising interest rates, instead using short term bonds. This resulted in a big performance loss -- attempting to time the market. Additionally they did not rebalance between stocks/bonds over time.

Their performance since starting in late 2007 was 4.7% CAGR which is pretty good, actually the same as pure Canadian stocks. Given their Canadian emphasis this seems about right.

Then out of curiosity I calculated the return of BMO Monthly Income for the same time period, as it's also heavy in Canada. It's 5.1% for the high MER version and 5.6% CAGR for the low fee D series version.

So this mutual fund, even with its 1% MER, outperformed the low fee ETF portfolio by a full 1% even after fees. Interesting! I can spot the reasons why:

+ good bond allocation, not trying to time the bond market
+ no cash drag
+ better international diversification
+ regular rebalancing

And I think that's the value of professional management using mutual funds. To me this is a clear example of how a 1% MER is worth it, when the fund is well managed and is able to successfully stick to the basics. This person wasn't a novice investor, and I was helping them manage the portfolio as well. And yet both of us made mistakes that hurt performance... especially on cash drag and trying to time the bond market.

I used to point more people to ETF investing and couch potato approaches. These days I find that I'm often recommending good quality portfolio mutual funds, since the fees have come down so much.
 

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That's really interesting James, thanks for those calcs.

I'm not sure that proves the case for paying a fairly high MER though. I wonder what the CAGR would be for the same portfolio setup with ultra low fee ETFs like VCN/VAG. (Although I don't think those go back to 2007).

More importantly...What I took away from your case study, was the value of sticking to a disciplined approach. That's a decent return for someone getting started at the worst possible time.
 

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That's really interesting James, thanks for those calcs.

I'm not sure that proves the case for paying a fairly high MER though. I wonder what the CAGR would be for the same portfolio setup with ultra low fee ETFs like VCN/VAG. (Although I don't think those go back to 2007).

More importantly...What I took away from your case study, was the value of sticking to a disciplined approach. That's a decent return for someone getting started at the worst possible time.
Yes.

Here is a link to Norm Rothery's wonderful Stingy Investor Asset Mixer for a 60/40 ETF portfolio.
http://www.ndir.com/cgi-bin/downside_adv.cgi?1=0&2=0&3=0.2&4=0.2&5=0.15&6=0&7=0&8=0&9=0.4&10=0.05&11=0&12=0&A1=-0.25&A2=-0.30&A3=-0.25&A4=-0.10&A5=-0.36&A6=-0.40&A7=-0.07&A8=-0.25&A9=-0.30&A10=-0.77&A11=-0.35&A12=-0.20&type=Nominal&MCarlo=Historic&StartYear=2008&StopYear=2018&StartSize=1000.00&Withdrawal=0.00&CADUSD=Canadian

The asset allocation is 40% all Canadian bonds, 20% TSX, 20% SP500, 15% EAFE and 5% Emerging. Alpha (~MER) is set as Global Alpha Assumption for ETFs (which is actually high compared to what many funds MER is today). Start date is 2008 / End date 2018 (James said start date for his comparison was late 2007, but the asset mixer only allows selecting full years). Changing the start date one year in either direction can make a big difference in the return.

Average Gain (geometric) is 5.5%. So ETFs would have had about the same return as the D-series balanced fund.

But yeah, James has a good point that many, perhaps even most people will not effectively manage even a simple ETF portfolio.

A friend age early 70s complained to me a couple of times about their portfolio that includes high-fee and DSC funds at Investors, some mutual funds at another bank and lots of cash from matured GICs, and asked for recommendations. They don't need any of the money for living expenses, and it is intended for an inheritance and bequests. I provided some reference material on investing in general, and ETFs. My inclination is that an asset allocation ETF like VBAL/VCNS or ZBAL/ZCON would be most suitable, due to the simplicity. I'm not asking for input here, just using this as an example of how for many people a simple set and forget portfolio that takes away the temptation to tinker and screw it up is most likely the best choice.

It will be very interesting going forward to compare the performance of asset allocation ETFs to existing low-fee balanced funds like Mawer Balanced and BMO Monthly Income D.
 

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Discussion Starter #49
I should clarify the takeaway message, I did not mean to say that mutual funds with 1% MER would outperform low fee ETFs. Instead I was trying to emphasize the benefit of good portfolio management -- discipline and methodology.

I agree that theoretical portfolio constructions using ETFs, such as couch potato, show excellent results. Here I am looking at a real world (11 year) account holding ETFs with that intention. Though the performance was acceptable, I think the real world account lost performance due to "management mistakes" such as allowing cash drag and trying to time the bond market.

What complicates this, though, is that professional funds can make management mistakes too. In fact the owner of this ETF account had considered the CIBC Monthly Income fund at the time. That mutual fund did worse over the 11 years, so in this case the ETF portfolio (mistakes and all) outperformed a mutual fund.

More importantly...What I took away from your case study, was the value of sticking to a disciplined approach. That's a decent return for someone getting started at the worst possible time.
Tough to conclude much from one case study. I'm just saying that portfolio management is important. Throwing some low fee index ETFs into an account is not enough to do well... one has to be careful about methodology, stay disciplined, and avoid human weaknesses like the temptation to time markets.
 

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Discussion Starter #50
GreatLaker -- on your comment about "set it and forget it" portfolios. I'm increasingly thinking that DIY portfolios made of index ETFs, like my case study, are a bad fit for people who want "set it and forget it".

The owner of my case study account was this kind of investor. They hardly ever logged into the account and had no intention to rebalance. Cash drag was inevitable with this kind of scenario. DRIP was not a realistic option as this was non-registered. I think the ETF portfolio requires a bit more engagement than this, at least doing cash management & rebalancing.

That being said, their return was acceptable and certainly beat some mutual funds, so maybe I'm overdoing the point.
 

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Yes.

Here is a link to Norm Rothery's wonderful Stingy Investor Asset Mixer for a 60/40 ETF portfolio.
http://www.ndir.com/cgi-bin/downside_adv.cgi?1=0&2=0&3=0.2&4=0.2&5=0.15&6=0&7=0&8=0&9=0.4&10=0.05&11=0&12=0&A1=-0.25&A2=-0.30&A3=-0.25&A4=-0.10&A5=-0.36&A6=-0.40&A7=-0.07&A8=-0.25&A9=-0.30&A10=-0.77&A11=-0.35&A12=-0.20&type=Nominal&MCarlo=Historic&StartYear=2008&StopYear=2018&StartSize=1000.00&Withdrawal=0.00&CADUSD=Canadian

The asset allocation is 40% all Canadian bonds, 20% TSX, 20% SP500, 15% EAFE and 5% Emerging. Alpha (~MER) is set as Global Alpha Assumption for ETFs (which is actually high compared to what many funds MER is today). Start date is 2008 / End date 2018 (James said start date for his comparison was late 2007, but the asset mixer only allows selecting full years). Changing the start date one year in either direction can make a big difference in the return.
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It will be very interesting going forward to compare the performance of asset allocation ETFs to existing low-fee balanced funds like Mawer Balanced and BMO Monthly Income D.
Thank you for that analysis. I use the Asset Mixer as well for comparative purposes. It is important to avoid using anything that includes the sharp V financial crisis in data ranges. I use either 1/1/2008 or 1/1/2010 in analyses because 1/1/2009 is a killer in screwing up useful trends.

To me, the key takeaways are:
1) Most investors would be best to just keep their hands off their investments and stick with a balanced fund (MF or ETF)
2) If the investor wants to deviate from 60/40, they either have to add an additional weighting in equity or fixed income accordingly, or pick one of the non-60/40 AA ETFs.
3) Recognize there could be differences in performance over time just because specific geographic weighting allocations vary between many of the funds.
 

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Is there a reason people have only mentioned MAW104 and not MAW 105? Mawer has two balanced funds, which are essentially the same, with MAW 105 having "tax effective" in its name.

Regarding the reality that "past performance is not indicative of future results," even those who work at Mawer are the first to say that. I know this because an investment counsellor at Mawer said exactly that to me before I decided to invest in their funds balanced funds.
 

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Do a search for Maw105 and you will find several past threads that mention it.

Yes, past not indicative of future, I think we learned that before we could walk didn't we?
 

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I did try using the search function to look for posts about Mawer, Maw104, and Maw105 but there weren't any results. I'm new to the site, so maybe there's something about the search function I'm not aware of.
 

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dont discount MAW130 - the Global Balanced Fund....

MAW130 seems to eek out a bit better performance vs MAW104 / MAW105
 

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Discussion Starter #57
It also has a considerably different asset allocation on a geographic basis, i.e. considerably less Cdn equity. What you are saying is Cdn equity has been a bit of a boat anchor over the recent past.
One should be cautious about chasing recent returns. This is the classic mistake by mutual fund investors... the funds themselves can do great, but people love hopping between them and hurting their own performance.

Rotating out of MAW104 to MAW130 due to the desire for greater returns would amount to "sell low" for Canadian stocks. Beware the temptation.
 

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I think that is a given that folks should understand by now. The Global one does not yet have 10 year performance.
 

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dont discount MAW130 - the Global Balanced Fund....

MAW130 seems to eek out a bit better performance vs MAW104 / MAW105
I'm already invested so don't plan on jumping funds. I was just looking for the threads about Mawer that someone referred to but couldn't find them. So if anyone else knows where those threads are, I'd appreciate if you would post the links.
 
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