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.
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.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 PH&N Balanced Fund (D Series) consistently shows excellent performance. It also allows a small initial $500 purchase, which is very nice.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.
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.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.
Yes.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.
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.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.
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.Yes.
Here is a link to Norm Rothery's wonderful Stingy Investor Asset Mixer for a 60/40 ETF portfolio.
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.
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.
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.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.
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.dont discount MAW130 - the Global Balanced Fund....
MAW130 seems to eek out a bit better performance vs MAW104 / MAW105