Burnaby NOW • Wednesday, February 13, 2013 • A15
The best balanced mutual funds for your RRSP
Quick! What’s the ideal balanced fund for an RRSP? It should be low-cost, conservatively managed, offer steady, stable performance, and consistently outpace its benchmark and peer group. The RBC Monthly Income Fund
is just such a paragon of perfection, having received the Fundata FundGrade A+ Rating for 2012, but alas, it has not been available for registered plans since 2005. Are there any alternatives? Of course there are. I scoured the fund universe in search of a few options, and here’s what I found: BMO Monthly Income Fund. The objective of this fund is to provide investors with a consistent level of monthly income and capital preservation. It invests in a mix of fixed income and high-yielding equities, such as dividend-paying common shares and REITs. It pays investors a monthly
distribution of $0.06 per unit, which works out to an annualized yield of nearly 10%. While I largely like the fund, there is one concern: The distribution is unsustainable at the current level without significantly eroding capital. However, for those reinvesting distributions in a nonregistered account, this isn’t as big a concern. Fidelity Monthly Income Fund. The fund, which just scored a Fundata FundGrade A+ Rating for 2012, aims for a mix of income and capital gains. To do this, the fund invests in a mix of fixed-income and high-yielding equity investments. Unlike the BMO or RBC offerings, this fund will invest outside of Canada. As of Nov. 30, more than a third of the fund was in global securities. It has also been the most volatile and the most expensive, with a 2.29% MER. Despite the higher costs, returns have been strong, posting top-quartile performance for the past five years. Mawer Balanced Fund. The target asset mix of this high quality offering from Calgarybased Mawer Investment Management is a fairly typical 60% equity and 40% fixed income. Unlike the other funds, which invest in individual securities, this is a fund-offunds that invests in a mix of other Mawer funds. It will invest globally, and as of Dec. 31, held more than 35% outside Canada. Despite this, volatility has largely been kept in check. The MER is very low, coming in
at 0.98%. And to top it off, the fund landed a Fundata FundGrade A+ Rating for 2012 as well. The biggest drawback to this fund is that the minimum investment is $5,000, which puts it out of reach for the smallest of investors. Stuck on RBC? No problem. Just build your own RRSP-eligible replica RBC Monthly Income Fund with a similar risk reward profile. A mix of 55% RBC Bond Fund and 45% RBC Canadian Dividend Fund should provide you a return that is comparable to the RBC Monthly Income Fund with similar
Provided courtesy of Fund Library, owned and operated by Fundata Canada.
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