# Investing in mutual funds



## Blush (Jan 9, 2014)

I transferred all my investments to rbc last yr. I was advised to put all of the money $50,000 into 1 fund, rbc select balance fund. Should I diversify into more than one fund? If so what are the best funds for moderate risk with good condistent performance. I am 50 yrs old and planning for retirement. I plan to do self investing thru the bank. Also have Tfsa $20,000 in a rbc divendend fund. Any advice would be appreciated. Tks


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## Spudd (Oct 11, 2011)

The RBC select balanced fund is a balanced fund which means it is fine to hold just that one fund. Within the fund, they have bonds, Canadian stocks, US stocks, and international stocks, so it is already very diversified. 

However, the MER (management expense ratio) is 1.95%, which means that you will pay the bank almost 2% of your balance ($975) every year for this fund. This will reduce the overall returns you can get. 

You might like to look for something cheaper. There is an ING Streetwise balanced fund (available from ING Direct) which has a pretty similar makeup to your fund, but an MER of 1.07%, which would be a fee of $535 per year instead of $975. 

Or you could "build your own" balanced fund by buying TD e-series funds as recommended by Canadian Couch Potato. http://canadiancouchpotato.com/model-portfolios/ You would have to do this via TD. 

There are even cheaper options but the complexity increases as you get cheaper, so I will stop here.


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## the-royal-mail (Dec 11, 2009)

I was "invested" in bank MFs for the past 12 years. Total return over that period was 1%. Like you, I had various balanced funds and what not. Huge waste of time and money. I should have ignored everybody and simply bought GICs and would be far better ahead today. Since you are 50 and plannng for retirement I feel you should NOT spend any more money on MFs. You need to protect your capital now, so move the money into GICs or at least solid dividend paying stocks. Don't make any more apppointments with the bank. The fees on MFs are huge.


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## wendi1 (Oct 2, 2013)

Balanced funds are okay for small amounts of money. As you get larger amounts, though, you are MUCH better off buying income generators yourself (GICs, bonds, or even bond ETFs) that do not have a large yearly fee. 

You can keep some of your money in a pure stock mutual fund, if you like, but most of these track some index which you can replicate yourself by buying ETFs. Or even the RBC Canadian Index fund - MER is .72% or way less than half of what you're paying.

Have a look at this guy - he has some smart suggestions. http://canadiancouchpotato.com/model-portfolios/

Fees matter - that almost 2 percent is very large.


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## Nemo2 (Mar 1, 2012)

PH&N, who are associated with RBC, have a balanced fund with a 0.89% MER.


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## OhGreatGuru (May 24, 2009)

the-royal-mail said:


> I was "invested" in bank MFs for the past 12 years. Total return over that period was 1%. ....


If your return over 12 years was that low, I would suggest it was due to your specific choice of funds, not because there is anything inherently bad about mutual funds. The Group average returns for Canadian Neutral Balanced Funds were 5 year -8.00%; 10 year - 5.50%; 15 year -5.01%.


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## Ponderling (Mar 1, 2013)

Mawer also has some reasonable funds. Few in the industry talk about them because there is no trailer fees paid to keep them interested. 

ETF's should be something to look towards as well. 

Try to find the Canadian personal finance magazine Moneysense in a library and read a year's worth of back issues for a bit of a crash course on different investment approaches where no one is trying to sell you stuff as part of your education.


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## OhGreatGuru (May 24, 2009)

Blush said:


> I transferred all my investments to rbc last yr. I was advised to put all of the money $50,000 into 1 fund, rbc select balance fund. Should I diversify into more than one fund? If so what are the best funds for moderate risk with good condistent performance. I am 50 yrs old and planning for retirement. I plan to do self investing thru the bank. Also have Tfsa $20,000 in a rbc divendend fund. Any advice would be appreciated. Tks


As noted by others, the Select Balanced fund is a portfolio fund that is already well-diversified. So you don't need to diversify in terms of asset allocation or risk.

But also as noted by others you can get better returns by investing in Index funds or other instruments. This will require some self-education on your part about investing. This site is a good place to start. 

(I'm not that keen on the RBC Select Balanced fund lately. In its first years it was doing better than the RBC balanced fund, for a lower MER. But their strategy of continuing to hold significant positions in US & International equity has not yet paid off.)

RBC does have its own index funds, but their MERs are ~0.95%. Read up on "Couch Potato Portfolio" for advice on index fund investing.

If you are more comfortable staying with managed funds; and would be happy dealing only by telephone and on-line with your account; you have a sufficient balance to move your account to PH&N. They have a good range of PH&N funds at low MERS; and offer some of RBC's funds in D series with lower MERs than you can get at the retail bank. They can do it because they have a minimum account balance of $25k, and don't have to support the overhead cost of a bricks-and-mortar branch system.


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## OhGreatGuru (May 24, 2009)

Blush said:


> ... Also have Tfsa $20,000 in a rbc divendend fund. Any advice would be appreciated. Tks


Regarding the TFSA, this rather depends on what your spending plans are for it. The RBC Dividend Fund is good for a dividend fund. But if you think you are going to have to make withdrawals in the short term, you may want less volatility. 50% Canadian Bond Index and 50% Dividend Fund will emulate the performance of RBC Monthly Income fairly closely (Monthly Income is no longer available in registered accounts.) If you need complete capital protection because you are saving up to buy a car soon, it should be in GICs.


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## AltaRed (Jun 8, 2009)

One last comment about RBC or PH&N mutual funds/accounts. I agree PH&N would be a better option than RBC retail due to lower MERs. I didn't know a PH&N account could hold D series RBC mutual funds (even at a minimum of $25k). The other option is an RBC Direct Investing account where the D series of RBC mutual funds can be held. They knock an average of circa 0.5% off the MER. The OP should go to the RBC mutual fund site and see the difference between the A and D series of the same mutual funds. The differences are significant. My bro and I put our elderly mom into an RBC DI account for both the D series of RBC funds and better GIC interest rates.

The RBC Select Balanced Fund may have historically underperformed but that was primarily due to US and Int'l markets and the strong Canadian loonie over the past several years. Both of those conditions are changing. It would be an error, in my opinion, to move away from US and Int'l weightings at this time. The loonie is likely headed for 85-90 cents over the course of 2014.

P.S. If your account is not a registered account, another RBC D series option is the RBC Monthly Income Fund through RBC Direct Investing. It has only about a 0.88% MER. That, and the RBC D series Canadian Dividend fund are the only two funds we have our mother in.

Lastly, I do not think there is any real need to move away from holding a single Balanced fund which is highly diversified in itself. What does matter is to ensure a low MER. That means getting out of the Royal Bank and going with PH&N or RBC Direct Investing.


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## dubmac (Jan 9, 2011)

consider MAW104 - Mawer Balanced RSP. great performance over the past. low mer = 0.78%. good asset mix. 12% avg cmpd growth over past 5 yrs, 20% over the past year - (but then again, this past year is likely the exception)! 5 star fund. 
I've been happy with it - it's about as a good as you'll get in a low cost, reasonably performing fund.


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## AltaRed (Jun 8, 2009)

Except, as I understand it, not many places sell Mawer funds..... other than through certain advisors, or through Mawer itself. Not convenient for most people that want to either invest through a bank or a discount brokerage.


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## MoreMiles (Apr 20, 2011)

BMO investorline sells Mawer no problem. Also, if it is a non-registered account, you should pick Mawer Tax Effective version... That one does cap gain and loss harvesting for you so you don't have any capital gain distributed on your T-slip at the tax time.


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## Blush (Jan 9, 2014)

*Thanks*



Blush said:


> I transferred all my investments to rbc last yr. I was advised to put all of the money $50,000 into 1 fund, rbc select balance fund. Should I diversify into more than one fund? If so what are the best funds for moderate risk with good condistent performance. I am 50 yrs old and planning for retirement. I plan to do self investing thru the bank. Also have Tfsa $20,000 in a rbc divendend fund. Any advice would be appreciated. Tks


Thanks for the suggestions. Meeting with td and rbc this week...will update later. Tks


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## gibor365 (Apr 1, 2011)

I would move cash to Peoples trust when saving account pays 1.8%, TFSA pays in Peoples trust 3%, and I would change your MF in RRSP/LIRA to ETF (like XIU or XIC for Canadian market) , VTI or SPY for US market, would add inrenational market VEA or VXUS or VT. 
Or buy some solid blue-chip stocks


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## dBII (Mar 12, 2013)

Out of interest, I compared the Mawer Tax Effective Balanced Fund against the Global Couch Potato. I am probably biased since I am heavily invested in Mawer. The shakeout was (Mawer[net]/GBC) 3yr = 11.0/8.1 5yr = 12.1/9.6 10yr = 7.6/6.2. 

Am I missing something? 

There are lots of very good fund managers out there who anticipate trends, research financial statements and study a world of other factors before deciding what to invest in. That's why I like them. Index funds are reactionary. They are based on the vagaries of the market at any time without any consideration for the other factors. 

There are some really crappy funds out there, but there are also very good ones and the fund manager seems to be the key. 

Do some research and you will find that there are indeed a number of fund managers who beat the market consistently and significantly. They know their fees are higher and they know that unless they do beat the indices, people won't buy them.


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## Feruk (Aug 15, 2012)

MERs of 0.7% or 0.88% are LOW?! The largest MER I'd even consider paying is 0.5%. Low is ~0.2%. Sure 2% is twice as pricy as 1%, but do not kid yourself that anything under 0.5% is low.


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## cainvest (May 1, 2013)

Feruk said:


> MERs of 0.7% or 0.88% are LOW?!


Compared to the average (non index related) mutual fund that charges around 1.75-2.25%, 0.7-0.8% would be low.


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## Lephturn (Aug 31, 2009)

Be sure to find out how these folks are compensated and what products they can have you purchase in these accounts. In most cases they are compensated largely based on assets under management - so they get a piece of that 2% MER. In most cases they are only licensed to sell mutual funds and nothing else - so that's all they can recommend.


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## avrex (Nov 14, 2010)

Welcome back @Lephturn! 
Nice to have you back. :congratulatory:


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## liquidfinance (Jan 28, 2011)

Feruk said:


> MERs of 0.7% or 0.88% are LOW?! The largest MER I'd even consider paying is 0.5%. Low is ~0.2%. Sure 2% is twice as pricy as 1%, but do not kid yourself that anything under 0.5% is low.



Depending on the circumstances you may not have a choice. Like you I would generally not be willing to pay over 0.5%. However, I just signed up to my employers RRSP with a 5% contribution. They will then match that 5% in the deferred profit share plan.

I had no choice but to choose from Manulife funds so will be paying in the order of 1.0% MER


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## gardner (Feb 13, 2014)

liquidfinance said:


> I had no choice but to choose from Manulife funds so will be paying in the order of 1.0% MER


My company pension is with MLF and the funds I'm invested in claim to have an IMF (MER, effectively, so they say) of 0.48% to 0.5%. I'm in 4191 Cdn bond, 7132 Cdn index and 8322 US index. This is partly a function of what your employer negotiated with MLF I think, but don't assume it disastrous.


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## jmarks (Feb 14, 2012)

dubmac said:


> consider MAW104 - Mawer Balanced RSP. great performance over the past. low mer = 0.78%. good asset mix. 12% avg cmpd growth over past 5 yrs, 20% over the past year - (but then again, this past year is likely the exception)! 5 star fund.
> I've been happy with it - it's about as a good as you'll get in a low cost, reasonably performing fund.


+1 on Maw104. They won the Canadian Lipper award for that fund last year and in previous years. I buy it at iTade with no extra fees but must hold 90 days min. Also ATB103 is a very similar actively managed fund bur the MER is double( and u can only buy through ATB), but again look at the long term trends on both, very good imho. Both funds target a return of 6% a year averaged over 5 years, and have achieved it.


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## jmarks (Feb 14, 2012)

DbII, do you own other Mawer funds than you mentioned? Curious as I'm taking a liking to them. I'm at the point in my life i want someone else to do the investing as the stock market itself is haywire and full of nuances that i can no longer keep straight. As an example Dark Pools are driving me nuts! How can we have a market place when the bigs boys can trade secretly with one another. Or HFT, people are making a killing off this and I'll guarantee that retailers are losing $$


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## dBII (Mar 12, 2013)

I have just that one fund with Mawer. If you look at the holdings, it provides all of the distribution I need. I have other investments, including E-series funds, but Mawer Tax Eff Bal is my core.


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