# VBAL vs MAW104



## martik777 (Jun 25, 2014)

I'm thinking of moving all of my retirement portfolio except 3 years of living expenses in cash, to one of there, I don't need withdrawals for 3+ years. My reason for a one fund solution is simplicity and greed. I could easily live on XDIV returns but why not accept a little more risk for greater returns. 

Since inspection ~ feb/18 VBAL has only gained ~3% whereas MAW104 is at 7.5% for the same period even, with 4x the MER. 

I have been hesitant to buy VBAL without any decent historicals vs MAW's excellent record.

Any thoughts?


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## AltaRed (Jun 8, 2009)

Depending on portfolio size, you could go 50/50 in both and hedge your bets. Way too early to tell how these will compare longer term. Did Mawer just get lucky with the 'active' bet they made this past year? Had they made a different bet, could it have been a zero percent gain in that period? There is simply no way of knowing.


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## james4beach (Nov 15, 2012)

VBAL doesn't have much track record so it's way too early to say they are underperforming. They have a couple weird little things going on that may or may not work out well for them. For example, they use derivatives to hedge currencies on _some_ of their bonds. With other currency hedged ETFs in the past we've seen underperformance. They also give themselves freedom to change their geographic allocations at any time. Only time will tell how well they manage those two things. I've been watching VBAL and so far, they're doing fine, and have about the expected market returns for a balanced fund.

Mawer is the one with above average performance, which appears to continue. As AltaRed says, the Mawer outperformance could be accidental too. There is no way to differentiate luck from skill in portfolio management, assuming the portfolio looks sane and reasonable (and both do).

Your comment about XDIV confused me. This is a 100% equities fund, and the balanced funds are 60% equities. It sounded like you were saying that moving to the balanced funds is accepting more risk, but it's the opposite: XDIV is riskier than both VBAL and MAW104. Also note XDIV weights 62% financials and 20% energy, so in addition to being all equities it also lacks sector balance.

Either VBAL or MAW104 are big improvements over XDIV. You will gain sector, geographic, and asset class diversification = safer in all ways.


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## dubmac (Jan 9, 2011)

I am no portfolio expert, but when one does some digging (which is something I can do well), a closer look at VBAL vs MAW reveals a few truths that can explain some of the reasons why MAW's performance is better.

Both VBAL and MAW104 are Global Neutral Balanced funds, but VBAL has :

10% more in Bonds that MAW104
much less cash than MAW104 (around 1% for VBAL vs around 9% for MAW104)
much more energy than MAW104 (VBAL has around 8% to around 3% for MAW104)
more real estate (around 4%) than MAW104 (around 1.4%)
....

and yes, VBAL has a lower MER, but certainly this hasn't made the picture better for VBAL...(yet).

other anomalies are the equity characteristics of each (ie: portfolio turnover rate in VBAL - it says here it around 25% for VBAL, 1% for MAW104).

I had high(er) hopes for VBAL..I expected more..(returns, etc). They have other products thatI watch carefully VCNS.


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## cainvest (May 1, 2013)

martik777 said:


> I'm thinking of moving all of my retirement portfolio except 3 years of living expenses in cash, to one of there, I don't need withdrawals for 3+ years. My reason for a one fund solution is simplicity and greed. I could easily live on XDIV returns but why not accept a little more risk for greater returns.


Is it really much more difficult to manage a few funds vs one? 
Guess this answer depends on how critical one is to maintaining asset class allocations and such but it also doesn't leave you with all your eggs in one (ok, two including cash) basket.

As mentioned above, you can split between VBAL and MAW104 along with your 3 yr cash holdings. Of course holding that amount of cash will drag down your returns ... maybe VBAL/MAW104/XDIV split and 2 years in cash if you want more greed/less security?


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## AltaRed (Jun 8, 2009)

Responding to a few comments above, asset allocations vary somewhat between all these options, including XBAL and ZBAL. No one knows in advance what will outperform.

I assert James' point about hedged currencies is bit excessive. VBAL is hedging only the global bond part of the portfolio and global bonds, especially US bonds, have been outperforming Canadian bonds the last little while. With the increasing loonie recently, hedging those non-loonie bonds has been a very good thing. I consider that slice a potential unique and winning part of that ETF.

With respect to XDIV, I believe the OP is considering the distribution yield as a solid investment income stream regardless of the market swings in XDIV capital appreciation (or depreciation). There is some merit to that if one assumes the investment income stream of XDIV is relatively immune to equity market turmoil. To date, there has actually been a slight upward trend in actual distribution payout and one would expect that to continue ad infinitum. A major market disruption may interrupt that sequence for a few years, especially since at least a few of the holdings would be expected to cut dividends in a major crisis with the majority perhaps holding the line like in 2008/2009. For a retiree, I think there is merit in XDIV as part of one's holdings just for the general reliability of the income stream. IOW, there is less risk in holding XDIV than the 100% equity allocation would otherwise suggest. Disclosure: My ex has a considerable portion of her Canadian equity in XDIV for the investment income stream.....and it consistently delivers in excess of 4%. For her, it is a 'set and forget' portion of her portfolio because at greater than 4% yield, she will likely never have to tap into invested capital.

I'll add again that if I had a significant portfolio and relied on it for the bulk of my retirement income, I'd split it MAW104 and VBAL with a cash wedge. As Cainvest articulated, maybe tinker with a portion in XDIV too, but that depends how much one really wants to begin to manage a more complex portfolio (~50% more effort to manage a 3 fund portfolio than a 1-2 fund portfolio).


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## cainvest (May 1, 2013)

AltaRed said:


> but that depends how much one really wants to begin to manage a more complex portfolio (~50% more effort to manage a 3 fund portfolio than a 1-2 fund portfolio).


So in terms of "real time", 30 minutes a year (3 funds) vs 20 minutes (2 funds). 
Maybe throw in an extra few minutes every 5-10 years if you decide to sell some XDIV.


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## AltaRed (Jun 8, 2009)

cainvest said:


> So in terms of "real time", 30 minutes a year (3 funds) vs 20 minutes (2 funds).
> Maybe throw in an extra few minutes every 5-10 years if you decide to sell some XDIV.


The harder part is the decision making of what to do with re-balancing 2 or more funds, and when. For many, this is a 'deer in the headlights' problem of doing nothing, or prematurely panicking and doing stupid things when markets go wonky. That is the beauty of the MAW104, VBAL, etc. An absolute need to do nothing at all.


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## cainvest (May 1, 2013)

AltaRed said:


> The harder part is the decision making of what to do with re-balancing 2 or more funds, and when. For many, this is a 'deer in the headlights' problem of doing nothing, or prematurely panicking and doing stupid things when markets go wonky. That is the beauty of the MAW104, VBAL, etc. An absolute need to do nothing at all.


True enough, one can make it simple or complicated.
If one were to set simple rules ahead of time with XDIV it could be like I said, minimal time spent. If you worry about asset allocations and rebalancing, well .... ya, it'll cost you time.


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## martik777 (Jun 25, 2014)

Yes, XDIV for the perceived security of endless dividends. One of the other reasons for a one fund solution is to simplify investing for the surviving spouse. Can't imagine mine re-balancing, just not gonna happen.


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## cainvest (May 1, 2013)

martik777 said:


> Yes, XDIV for the perceived security of endless dividends. One of the other reasons for a one fund solution is to simplify investing for the surviving spouse. Can't imagine mine re-balancing, just not gonna happen.


One option is not to rebalance the XDIV, the other two (VBAL/MAW) take care of themselves.


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## AltaRed (Jun 8, 2009)

cainvest said:


> One option is not to rebalance the XDIV, the other two (VBAL/MAW) take care of themselves.


I agree there would likely be no need to routinely re-balance XDIV, but someone somewhere sometime may well decide 10 years down the road to ask a 'no fee' planner of some sort whether anything should be adjusted. Simply because eventually MAW104/VBAL will wind down and so XDIV will need to be tapped into eventually. 

Remember the further one is down the journey to end of life, the less important it is to have a balanced portfolio to survive decades of retirement. A 90 year old person isn't going to eat dog food for the next 10 years if equity markets do poorly and that old person winds down a portfolio containing 100% XDIV.


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## cainvest (May 1, 2013)

AltaRed said:


> Simply because eventually MAW104/VBAL will wind down and so XDIV will need to be tapped into eventually.


If needed, one could easily switch the entire XDIV holdings to VBAL or MAW later (or anytime they wish) to avoid the gravy train diet. What's XDIV likely to do anyways, maybe smooth out some market dips over the beginning of retirement and is not really needed later on. So say you've tapped 50% of your VBAL/MAW holdings, fill in one or both by selling XDIV at that time. 

Regardless of your portfolio holdings, if a "bad planner" comes in all bets are off! Even if someone were just holding MAW104 ... there really is no protection from bad decisions some people can make.


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## AltaRed (Jun 8, 2009)

True. My comment about a 'check' by some 'fee only' planner at some future date was related to this OP comment


> One of the other reasons for a one fund solution is to simplify investing for the surviving spouse. Can't imagine mine re-balancing, just not gonna happen.


I would definitely switch some XDIV to VBAL or MAW104 at a suitable future date, but the owner of the portfolio, such as a disinterested surviving spouse, may not know when to do it, or to do it at all.


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## james4beach (Nov 15, 2012)

With XDIV, I really have trouble with the sector allocations. This fund has 82% of assets in just two sectors, and banks are a huge weight. Even with the convenience of dividends & low MER, to me this severe sector concentration seems like a bad idea. All it would take is a bad bear market in Canadian banks to ruin your retirement. This is a recurring problem with dividend-focused investment because it tends to cause lopsided portfolios like this one.

Going back to the surviving spouse issue, considering they will need to place "sell" trades on the fund, you might be better off with MAW104. Mutual fund trades are easier to make as you can place them for arbitrary $ amounts, fractional shares, and there's a single daily price instead of the complication of bid/ask and limit versus market orders as with ETFs like VBAL.

~ Additional idea ~

For people who've asked me about a good balanced mutual fund, I've previously pointed them to BMO Monthly Income D series.

This is an all-in-one balanced fund along the lines of VBAL and MAW104, including good diversification across geography, asset classes, and sectors. Really ticks all the boxes for a good all in one fund. The D series is available at discount brokerages and has 1.02% MER which isn't too bad. Unfortunately I don't know where to see the exact cash distribution amount but TDDI says distribution yield = 3.48%

So you're getting a well diversified portfolio, zero management or rebalancing work, plus automatic cash payouts. To me it seems like this fits the specifications you're looking for. The performance since inception in 1999 is 6.3% annualized, which I got by looking at the A series version and then adding 0.55% more annual performance due to lower MER.

The only question with this one is the amount of the monthly cash distribution.


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## AltaRed (Jun 8, 2009)

CDZ has an atrocious MER relative to XDIV so the reason I believe it was not mentioned as a candidate. An example of Blackrock holding legacy CDZ shareholders hostage. 

I actually am not worried about sector concentration IF the intent of the holding is the distribution yield to juice investment income. If/when (if ever) Blackrock trashes that MER on CDZ, I'd have a different opinion.


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## OnlyMyOpinion (Sep 1, 2013)

martik777 said:


> I'm thinking of moving all of my retirement portfolio except 3 years of living expenses in cash, to one of there, I don't need withdrawals for 3+ years. My reason for a one fund solution is simplicity and greed. I could easily live on XDIV returns but why not accept a little more risk for greater returns.
> Since inspection ~ feb/18 VBAL has only gained ~3% whereas MAW104 is at 7.5% for the same period even, with 4x the MER.
> I have been hesitant to buy VBAL without any decent historicals vs MAW's excellent record.
> Any thoughts?


I'm wondering where you are getting ~3% since inception? Vanguard reports 3.94%, while a TMX 1 year plot says 5.22% for VBAL and 6.91% for VBAL. To my eye they have tracked pretty closely, with MAW104 outperforming by a small margin.

I'd agree with the suggestion of splitting your portfolio between them if you are uncertain. It's what I've done in part and am moving towards fully, with several years of 'cash' (GIC's, etc.) as you propose.


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## AltaRed (Jun 8, 2009)

Not sue either - Morningstar https://www.morningstar.ca/ca/report/etf/performance.aspx?t=0P0001CLVR&lang=English (Canada)


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## cainvest (May 1, 2013)

AltaRed said:


> I would definitely switch some XDIV to VBAL or MAW104 at a suitable future date, but the owner of the portfolio, such as a disinterested surviving spouse, may not know when to do it, or to do it at all.


The "disinterested surviving spouse" definitely could have issues if too complicated. Really though, if the spouse can do trades (buy/sell) I think all is good, otherwise someone trustworthy, family or friend, could possibly help out.

Even just a simple plan written on a sheet of paper ... 
- sell 'x' amount of VBAL/MAW per year to fill the cash holdings.
- when you reach __ age, sell XDIV and buy VBAL or MAW.

Ya, it'll probably be a bit more complicated, don't know if it's all in RRSP or some TFSA or in a taxable account.


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## cainvest (May 1, 2013)

james4beach said:


> With XDIV, I really have trouble with the sector allocations. This fund has 82% of assets in just two sectors, and banks are a huge weight. Even with the convenience of dividends & low MER, to me this severe sector concentration seems like a bad idea. All it would take is a bad bear market in Canadian banks to ruin your retirement.


Actually I think having the heavy financial weight is good, less likely to get dividends cut in bad times IMO.
With the bulk of the portfolio in both VBAL and MAW you already have tons of diversification right?


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## martik777 (Jun 25, 2014)

VBAL started on Feb 1/18 at 25, on Jul 8/19 was 25.69 = 2.76%

MAW104 on Feb 1/18 was 28.48, Jul 8/19 was 30.66 = 7.65%

https://www.mawer.com/funds/daily-prices/?date=2018-02-01



https://ca.finance.yahoo.com/quote/...55600&interval=1d&filter=history&frequency=1d


Edit:
I rechecked VBAL Feb 1 closing, it was actually 24.74 (I assumed it was 25) so it would be 3.83% not 2.76%


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## james4beach (Nov 15, 2012)

Sorry, I had edited and written some new stuff ... I didn't realize this thread was active at the moment.

New thought:

Going back to the surviving spouse issue, considering they will need to place "sell" trades on the fund, you might be better off with MAW104 over an ETF. Mutual fund trades are easier to make as you can place them for arbitrary $ amounts, fractional shares, and there's a single daily price instead of the complication of bid/ask and limit versus market orders as with ETFs like VBAL.

Same story with the BMO Monthly Income D series mutual fund I mentioned. Plus it has the added advantage that you can take the cash distribution, which is equivalent to automatically selling some MAW104 every month.

If it's a non-registered account, I think tracking for tax reporting issues is also easier with mutual funds. The ETF could do one of those weird distributions which tends to happen from time to time and requires special handling.


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## martik777 (Jun 25, 2014)

It's mostly registered. I like that BMO fund, not much history though. I don't have an issue with monthly withdrawals, will probably make them annually or S/A. I wonder if anyone has done an analysis of the difference? Like $ cost averaging in reverse.


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## james4beach (Nov 15, 2012)

martik777 said:


> It's mostly registered. I like that BMO fund, not much history though. I don't have an issue with monthly withdrawals, will probably make them annually or S/A.


The D series is pretty new, but that's just the low MER version for discount brokerages. The fund has been around since 1999 with the higher MER series A. So this fund has a 20 year history, very well established.

BMO Monthly Income - Series A with MER 1.57%, had 5.82% annual performance since 1999
BMO Monthly Income - Series D with MER 1.02%, has +0.55% more performance per year

If you look at both these pages you will see their annual performance difference is the MER difference. They are the exact same fund. The 20 year performance for the Series D would have 5.82% + 0.55% = 6.4% per year.

I once bought it as a test while researching it for a friend, and it paid a 3.5% distribution at the time (had to check my old broker statements). The fund code is GGF31148


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## AltaRed (Jun 8, 2009)

martik777 said:


> VBAL started on Feb 1/18 at 25, on Jul 8/19 was 25.69 = 2.76%
> 
> MAW104 on Feb 1/18 was 28.48, Jul 8/19 was 30.66 = 7.65%
> 
> ...


No idea what you are trying to calculate there. Price appreciation alone is only part of the return. The rest is distribution yield. You have to go to the specific fund pages to get 'performance returns', or as is known to the rest of us as "Total Return".


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## OnlyMyOpinion (Sep 1, 2013)

^+1, yes OP is looking only at change in unit price. 
Ignoring the distributions to date is like buying a stock paying a 4% dividend but ignoring that and only considering share price in its performance.
Incidently, VBAL shows a current 'distribution yield' of 2.255%.


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## james4beach (Nov 15, 2012)

The Vanguard page for VBAL lists distribution yield of 1.92%


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## AltaRed (Jun 8, 2009)

The yield percentage will vary from source to source because quarterlies are not identical each time, depends on whether the last dividend is multiplied by 4, or is a trailing yield from last 4 quarters, and whether calculated on market price of the day. Quoted yield percentages should only be taken as approximations without knowing the specific assumptions.


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## james4beach (Nov 15, 2012)

Yes. That reminds me, the yield on either the mutual fund or ETF should also be taken with a grain of salt because it can vary over time. The distributions are made up of some combination of dividends, interests, capital gains, and return of capital. Even if companies' dividends remain steady, the fund's distribution can change in the future (for many reasons) so one shouldn't expect a certain level of distribution forever.

The OP commented in the first post that they could live off XDIV distributions forever. I think to be certain of this you'd want to dig into the cash distribution and make sure it's entirely coming from dividends (they don't always!).

Take XIU as an example, which has a very long history. Looking at its yearly pattern of dividends paid out, ignoring the other things in its distribution, I think one can reliably expect it to pay $0.60 per share a year in dividends. For a $1M investment = 40,064 shares, that works out to 24 K a year in cash dividends that you can count on, conservatively.

This is worth considering because looking at just the stated distribution yield % might give an inflated sense of the future distribution, especially if there's any return of capital in that.


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## martik777 (Jun 25, 2014)

AltaRed said:


> No idea what you are trying to calculate there. Price appreciation alone is only part of the return. The rest is distribution yield. You have to go to the specific fund pages to get 'performance returns', or as is known to the rest of us as "Total Return".


Oops! Sorry, I assumed distribution yield was included.


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## latebuyer (Nov 15, 2015)

Just curious, is it bad that VBAL has such a high turnover?


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## kcowan (Jul 1, 2010)

Higher turnover is a sign of more buying/selling. Only bad if it shows up in higher expenses and not commensurate higher returns.


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## AltaRed (Jun 8, 2009)

Depends on why and how much cap gains may have been realized. Since VBAL is nothing more than a collection of 7 ETFs, turnover is a reflection of the turnover in the underlying ETFs, plus changing allocations of the 7 ETFs. Bond ETFs typically have high turnover due to the rotating out and in of bonds of changing durations. Cap gains/losses generally are minimal in bond ETFs. Turnover in equity ETFs fully depends on turnover in the underlying composition of the indices. I lose zero sleep over turnover in passive index ETFs.


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## james4beach (Nov 15, 2012)

AltaRed said:


> Since VBAL is nothing more than a collection of 7 ETFs


_Today_, VBAL just holds 7 ETFs (which I agree looks great) but this can change in the future. Their prospectus does not define VBAL to be a fund that 'holds these 7 index ETFs' but rather gives the fund manager the leeway to pick and choose just about any investments they want.

To see an example of the direction that might possibly go, look at iShares XTR. This used to be a pretty simple balanced fund, a mix of stock and equity using a few ETFs. Today it's a soup of 9 oddball ETFs ranging from junk bonds to other off-beat choices in fixed income.

Here's a chart of XTR (green) versus VBAL (black). Practically the same.

You'll notice they have nearly the same movements and performance. XTR, though not talked about much here, was a much earlier instance of a low fee balanced fund made entirely of ETFs. I don't know why everyone got so excited about VBAL... it's probably smart marketing by Vanguard plus riding the current popularity of "index investing". But iShares already did the same concept, when XTR stopped being income trusts and became a balanced fund in 2011.

XTR has done poorly. Its performance has lagged the well-established BMO mutual fund I listed earlier, by a whopping 2% CAGR over the last 5 years. This is tremendous underperformance. But how could this be?? XTR held low fee index funds. I thought "index funds" were great and "low fees" were great. XTR did the same thing VBAL does. How could it perform so badly?

Well, it's because managing a portfolio isn't easy over the long term. Low fee index ETFs do not automatically create a good fund, and that's the key thing I think VBAL investors and supporters are missing. There is a really big difference between couch potato asset allocation and VBAL. Due to the fund manager's discretion, VBAL is much more like an actively managed mutual fund by design. The fact the holdings are "index ETFs" does not matter much because active decisions can be made to buy & sell them over the years. And this almost always hurts returns (market timing, performance chasing, hindsight bias, fear & greed, etc).

Why do you think VBAL will turn out to be a success, when XTR has been such a failure? In both cases, managers have the freedom to choose, swap, substitute, any ETFs into the fund. Things like this happened to XTR, where its constituents started changing over time.

VBAL's MER is only 0.37% less than XTR. Otherwise, they are the same concept. Both are balanced funds that hold purely index ETFs.

I don't endorse jumping into VBAL. Managing a portfolio has a lot of potential pitfalls, and just because VBAL's holdings look sane today (as XTR did in 2011 initially) doesn't mean Vanguard will do a good job managing the portfolio. There is no guarantee that VBAL will passively hold index ETFs similar to what they hold now.

Only time will tell if the Vanguard VBAL fund manager is making good decisions. The Blackrock XTR fund manager didn't make good decisions, and it cost investors huge returns.


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## like_to_retire (Oct 9, 2016)

If I look at these securities and include dividends to produce charts of Total Return (which is the only way to compare them), that pesky MAW104 always seems to win.

As noted already, VBAL has only been around for less than 2 years, so it's tough to do a longer term comparison.

Below is a One year chart of MAW vs XTR vs BMO/ZMI vs VBAL. One year is fairly useless, but MAW does win and VBAL is the worst.









Below is the Five year chart of MAW vs XTR vs BMO/ZMI. VBAL is obviously excluded. 
Interesting that ZMI and XTR are so close. 
MAW walks away with the prize - big time it seems.









ltr


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## james4beach (Nov 15, 2012)

Thanks for the charts ltr. Where you graphing these?

XTR and ZMI being similar isn't surprising as they are direct competitors. They are both balanced funds with similar allocations and a focus on higher yielding securities.

If I wanted a one-fund diversified solution, personally I would either buy Mawer Balanced or BMO Monthly Income (series D) or both. I believe the higher MER is worth it for the proven track records and proven long term portfolio management.


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## cainvest (May 1, 2013)

james4beach said:


> Why do you think VBAL will turn out to be a success, when XTR has been such a failure? In both cases, managers have the freedom to choose, swap, substitute, any ETFs into the fund. Things like this happened to XTR, where its constituents started changing over time.


But isn't this true for pretty much any mutual fund or ETF?


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## james4beach (Nov 15, 2012)

cainvest said:


> But isn't this true for pretty much any mutual fund or ETF?


True, it can happen to any mutual fund (including Mawer) or any portfolio that any of us manage including couch potato.

I'm assuming that the long track record of Mawer or the BMO one I like is an indication of good management. This could come from things like institutional wisdom, processes, peer review, or codified rules (proprietary to the firm) which help the team manage this well over the years. The fact the fund has done quite well for 30 years (Mawer), or 20 yrs (BMO) suggests to me that there is probably _something_ to their process.

But that's just an assumption. Their good results could also be dumb, random luck. Personally I think it's worth paying an extra 0.7% fee for what's probably skilled management. The more I've learned about portfolio management over the years, the more I see it actually is tricky. This has made me appreciate the role of skill more than I used to.


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## cainvest (May 1, 2013)

james4beach said:


> True, it can happen to any mutual fund (including Mawer) or any portfolio that any of us manage including couch potato.
> 
> I'm assuming that the long track record of Mawer or the BMO one I like is an indication of good management. This could come from things like institutional wisdom, processes, peer review, or codified rules (proprietary to the firm) which help the team manage this well over the years. The fact the fund has done quite well for 30 years (Mawer), or 20 yrs (BMO) suggests to me that there is probably _something_ to their process.
> 
> But that's just an assumption. Their good results could also be dumb, random luck. Personally I think it's worth paying an extra 0.7% fee for what's probably skilled management. The more I've learned about portfolio management over the years, the more I see it actually is tricky. This has made me appreciate the role of skill more than I used to.


This brings back memories of the old days when people used to follow fund managers on which mutual funds to buy (or sell), not sure how well that worked out. Then came the index ETFs and the stats that most mutual funds never beat the index so why pay the higher "active management" fees to get lower returns. Now some of those low cost ETFs are underperforming funds that have higher fees over the long term, had to happen I guess. 

In any case, I don't think you should throw VBAL under the bus just because XTR did silly things, any of them *could* go bad whether a long or short history. One possible indicator, not sure how much faith I have in it, is the quartile rank. Maybe have a peek at your BMO Monthly rank vs the Mawer Balanced rank over 10 years and see what you think.


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## james4beach (Nov 15, 2012)

Good points cainvest. I actually have a slightly different take on this, which is that index ETFs are still managed portfolios. There is still "management" behind something like the TSX 60 or TSX Composite. The people at S&P have various criteria, and decide when to add and remove securities. They make regular updates and apply methodology and screening.

There's still a manager behind something like XIU or XIC. The game changer was that (a) management comes ultra cheap, almost nil % and (b) these managers make minimal changes and use cap weighting to avoid trades.

So I see "indexing" as just a shift towards a kind of centralized or outsourced portfolio management, ultra low fee, low turnover. There is still a portfolio manager behind the TSX Composite and we still need that management team to have skill.


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## cainvest (May 1, 2013)

I personally don't consider rule based (strict criteria) systems to be so called "managed", or at the very least, not "actively managed". Of course this means that someone is not changing the rules as well. Sure they are making trades based on their rules but they are not imposing their own judgement calls on what to put in there, it's clearly defined. Yes, some indexes stray from their actual index or take a subset of the index, like to minimize trading costs but again, their rules are clearly stated.

Other funds, like your BMO Monthly Income or VBAL do not have strict rules, they have defined investment objectives and a strategy. How lose or tightly defined the objectives and strategy are should give one a good idea on how the funds will be managed.


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## james4beach (Nov 15, 2012)

Ah, that's an interesting point: rules-based criteria means there is no judgement call being made.

I don't fully understand the TSX methodology (it's described in this document). It's generally rules based, but there do appear to be several choices that are at the discretion of the committee.


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## like_to_retire (Oct 9, 2016)

james4beach said:


> Thanks for the charts ltr. Where you graphing these?


The graphs are from TMX.

The graphs are basic, but I like them to do quick comparisons that allow both unadjusted and total return.

Obviously, StockCharts are better for the tons of crazy conditions that are allowed in their graphs, but it's a chore to fuss with when I just want a quick comparison.

At TMX, just enter a Quote symbol and then select the Charting Tab. It then allows you to select either unadjusted or with "with dividends" graphs.

ltr


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## james4beach (Nov 15, 2012)

TMX, wow. Yes I see you can select "splits and dividend" adjustments -- very nice.

But the much bigger surprise is that I can enter MAW104 or GGF31148 as a symbol. As far as I know TMX is the only place you can chart split & dividend adjusted total returns, including mutual funds alongside stocks and ETFs.

The TMX charting tool appears to even adjust/not adjust for the mutual fund distributions. Take GGF31148 for example which is a balanced fund with high distributions. If I chart one year with adjustments, I see 6.70%. If I turn off the adjustments, it's 0.22%.

Surprising to see that the two mutual funds discussed in this thread have done much better than VBAL over 1 year.


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