How the best balanced funds are riding the bear market

How the best balanced funds are riding the bear market

Low-fee and resilient, these funds remain key for diversified investors


Investors have been taken on a wild ride in recent months. The Canadian stock market fell by more that 20% from its all-time high and well into bear market territory early this year. While it clawed back a bit since then, the market remains depressed.

But the big downturn in Canadian stocks didn’t make a big an impact on diversified investors. It’s one reason why I highlighted five balanced funds for MoneySense readers last June in an article called “Where to invest $10,000 now“.

Balanced funds tend to be much less volatile than stock funds, or individual stocks, because they hold diversified portfolios of stocks and bonds. The combination helps to dampen out the market’s swings, which makes the funds easier to stick with through thick and thin.

Let’s see how the funds fared over the last year. Here’s what I said about two balanced index funds.

“I’ve also listed a couple of balanced funds that hold passive portfolios designed to track broad market indexes. The CIBC Balanced Index Premium fund requires a hefty initial investment of $50,000 but charges only 0.39% annually. The TD Balanced Index fund requires only a $100 initial investment, but charges 0.89% per year.”

Over the last 12 months the CIBC fund lost 1.9% and the TD fund fell 2.2%, according to Those aren’t marvellous results, but they’re much better than the Canadian stock market, which fell 8.2% over the same period, including reinvested dividends.

Now let’s see what I said about the three active funds.

“I’ve been a long time fan of two balanced funds from Calgary-based Mawer Investment Management. The Mawer Balanced fund charges 0.96% a year, has beaten the market by an average of 1.6 percentage points a year over the last 10 years, and is designed for RRSPs. The other is the Mawer Tax Effective Balanced Fund which charges 0.98% a year, has bested the market by 1.5 percentage points a year over the last 10 years, and is designed for regular taxable accounts. You can get both with a $5,000 initial investment through a discount broker.

The Steadyhand Founders fund is an alternate that comes with an unusual fee structure. It offers rebates to those who have more money in the fund and who have stayed with it for a long time. As a result, the annual fee on the Founders fund ranges between 0.69% per year and 1.34% per year. If you have $10,000, you can buy the fund directly from Steadyhand.”

Over the last 12 months the Mawer Balanced fund gained 1.3%, the Mawer Tax Effective Balanced fund gained 1.1% while the Steadyhand Founders fund gave up 1.8%. They all beat the index funds, but it was an admittedly near thing for the Steadyhand fund.

While it hasn’t been a great period for investors, I still believe that the five low-fee balanced funds mentioned above represent good long-term options for new investors–or those who don’t want to spend much time on their investments.

Safer Canadian Dogs

Investors following the Dogs of the Dow strategy want to buy the 10 highest yielding stocks in the Dow Jones Industrial Average (DJIA), hold them for a year, and then move into the new list of top yielders.

The Dogs of the TSX works the same way but swaps the DJIA for the S&P/TSX 60, which contains 60 of the largest stocks in Canada.

My safer variant of the Dogs of the TSX tracks the 10 stocks in the index with the highest dividend yields provided they also pass a series of safety tests, such as having positive earnings. The idea is to weed out companies that might cut their dividends in the near term. Just be warned, it’s a task that’s easier said than done.

Here’s the updated Safer Dogs of the TSX, representing the top yielders as of March 8. The list is a good starting point for those who want to put some money to work this week. Just keep in mind, the idea is to hold the stocks for at least a year after purchase – barring some calamity.

Name Price P/B P/E Earnings Yield Dividend Yield
National Bank (NA) $40.56 1.46 9.97 10.03% 5.33%
CIBC (CM) $95.18 1.81 10.53 9.50% 4.96%
Shaw (SJR.B) $24.13 2.19 13.71 7.29% 4.91%
Bank of Nova Scotia (BNS) $61.23 1.45 10.58 9.46% 4.70%
BCE (BCE) $58.44 3.89 19.61 5.10% 4.67%
Royal Bank (RY) $72.70 1.71 10.9 9.17% 4.46%
TELUS (T) $40.15 3.11 17.53 5.70% 4.38%
Bank of Montreal (BMO) $77.13 1.29 11.48 8.71% 4.36%
Power Corp (POW) $28.84 1.06 7.23 13.84% 4.32%
Emera (EMA) $46.87 1.98 17.21 5.81% 4.05%

Source: Bloomberg, March 8, 2016


Price: Closing price per share

P/B: Price to Book Value Ratio

P/E: Price to Earnings Ratio

Earnings Yield: Earnings divided by Price, expressed as a percentage

Dividend Yield: Expected-Annual-Dividend divided by Price, expressed as a percentage

As always, do your due diligence before buying any stock, including those featured here. Make sure its situation hasn’t changed in some important way, read the latest press releases and regulatory filings and take special care with stocks that trade infrequently. Remember, stocks can be risky. So, be careful out there. (Norm may own shares of some, or all, of the stocks mentioned here.)

Required Reading

Warren Buffett’s letter to investors
“It’s an election year, and candidates can’t stop speaking about our country’s problems (which, of course, only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do. That view is dead wrong: The babies being born in America today are the luckiest crop in history.” — Warren Buffett