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Last October, we researched the Fidelity Monthly Income Fund as a potential Holding, and recommended it for your consideration.

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News from globeandmail.com

Balanced funds that held up under pressure

Friday, July 27, 2012

ROB CARRICK

What we're looking at

Amid tense financial market conditions, balanced funds remain the most
popular choice of investors by far. The mix of stocks and bonds in these funds
clearly offers some comfort. But which Canadian balanced funds have managed the
financial market volatility of the past few years the best? For answers, let's
consult the independent mutual fund analyst Dave Paterson of D.A. Paterson &
Associates Inc.

Our screen

Mr. Paterson says his focus in evaluating funds is their ability to manage
volatility. For this screen, he applied two measures:

Standard deviation: Shows how much variation there is in a fund's monthly
gains and losses; only funds with a five-year standard deviation of less than 12
made the list (the lower the number, the better).

Sharpe ratio: Adjusts returns for the amount of risk being taken on; funds
presented here have a five-year ratio of more than 0.13 (the higher the ratio –
devised by economist William Sharpe – the better the blend of risk and
return).

Other factors built into this screen: Management expenses ratios had to be
below 2.25 per cent, fund-of-fund products were excluded and upfront investment
requirements had to be $25,000 or less. Note: GBC funds have a $100,000 minimum,
but Mr. Paterson said a $10,000 minimum applies when the company's funds are
bought through an investment dealer rather than direct from GBC.

What we found

There are three different categories of Canadian balanced funds – one with an
emphasis on stocks, one with roughly equal amounts of stocks and bonds and one
that mainly holds bonds. Given how bonds have outperformed stocks over the past
five years, it's not surprising that this latter category produced the most
funds in our screen results. Looking ahead, balanced funds with an emphasis on
stocks would be best positioned for an economic rebound and stronger stock
market conditions.

                         

 

 

 

               

Returns to June 30 (%)

FUNDS THAT FIGHT VOLATILITY

      Total Min. 5 Yr 5 Yr.              
      Asset Invst. Standard Sharpe   Returns to June 30 (%)
Fund Category MER (%) ($ Mil.) ($) Deviation Ratio   YTD 1 Year 2 Year 3 Year 5 Year 10 Year
FMOQ Monthly Income Cdn Equity Bal 1.0 147.4 500 9.3 0.29   0.4 0.6 6.8 9.5 3.9  
GBC Growth and Income Cdn Equity Bal 1.7 33.3 10,000 11.0 0.20   6.0 5.7 14.2 14.6 3.1  
Middlefield Income Plus A Cdn Equity Bal 2.0 82.5 1,000 8.9 0.62   1.6 1.5 6.8 11.6 6.9 9.4
TD Monthly Income I Cdn Equity Bal 1.5 5,956.4 100 10.1 0.18   2.5 2.0 7.5 9.4 2.9 8.3
Caldwell Income Cdn Fixed Inc Bal 1.3 14.3 500 4.1 0.52   1.9 -1.1 2.4 3.8 3.7 3.7
Fidelity Income Allocation B Cdn Fixed Inc Bal 1.8 972.5 500 10.6 0.40   2.7 5.8 9.4 14.2 5.4  
HSBC Monthly Income Inv Cdn Fixed Inc Bal 1.5 816.2 500 5.5 0.21   2.6 -0.3 4.0 5.2 2.6  
Mac Sentinel Income A Cdn Fixed Inc Bal 1.9 1,392.6 500 5.6 0.22   1.4 2.7 5.5 6.3 2.6 5.0
Manulife Structured Bond Class Cdn Fixed Inc Bal 1.7 67.2 500 4.3 0.70   2.3 4.7 4.9 6.3 4.6  
SEI Income 20/80 Class P Cdn Fixed Inc Bal 1.9 83.8 1,000 4.5 0.48   1.8 3.8 5.3 5.8 3.7  
SEI Income 30/70 Class P Cdn Fixed Inc Bal 2.1 48.9 1,000 5.5 0.20   1.8 2.5 5.2 5.6 2.5  
Steadyhand Income Cdn Fixed Inc Bal 1.0 66.9 10,000 5.6 0.94   3.6 7.2 8.6 10.9 7.0  
BMO Monthly Income Cdn Neutral Bal 1.6 4,733.8 500 7.2 0.17   0.8 0.4 5.9 6.6 2.5 5.3
Fidelity Canadian Balanced B Cdn Neutral Bal 2.1 6,691.0 500 9.5 0.20   1.6 -0.6 6.6 7.5 3.0 6.6
Fidelity Monthly Income B Cdn Neutral Bal 2.1 6,386.5 500 8.7 0.38   3.3 3.9 9.8 11.9 4.6  
RBC Monthly Income Cdn Neutral Bal 1.2 8,119.1 500 7.0 0.32   2.1 2.2 6.7 7.3 3.6 7.3
                           
Source: D.A. Paterson & Associates Inc.                    
Ted Wernham
Ted Wernham
Ranked # 1 in London by MDRT, the Premier Association of Financial Professionals. retirement income manager, Host Retirement Ready! Radio on AM1290 Ted Wernham