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Putting balanced funds through their paces


Canadian investors love balanced funds, which are supposed to offer a smooth ride because they mix stocks with less volatile bonds. Let's see how this approach worked on Monday, the day the S&P/TSX composite index plunged 4.75 per cent.


Balanced funds are ranked by their returns Monday from best on down. We've also included returns for the calendar year 2007 to get some extra insight on fund performance. Note that we're looking at balanced funds with most of their assets in stocks (technically, this is the Canadian balanced equity category). There are other more conservative balanced funds with an emphasis on bonds.


None of the funds made money on Monday, but that's no slight on them when the stock market was having its worst day in seven years. The question, really, is whether balanced funds are a good choice for conservative investors worried about volatile markets.

The evidence from Jan. 21 tells us that balanced funds can give you exposure to the stock market while protecting you against the worst of a market decline. Almost all the funds in our screen were down half as much as the index or less, which means their bond component was providing at least some buoyancy.

If you check the one-year returns, the idea of balanced funds becomes somewhat harder to get excited about. The average Canadian equity fund made 7.3 per cent last year, while the average Canadian bond fund made 1.9 per cent. So how is it that so many balanced funds on our list lost money last year or made less than 2 per cent?

It might come down to exactly what's in a fund. Take National Bank Dividend. Financial stocks account for about 44 per cent of the portfolio, and they've been hit hard in recent days. CI Signature High Income has about one-third of its assets in income trusts, which haven't had the best of years. If you're looking to balanced funds to provide stability in volatile markets, be sure to see exactly what it is you're buying.

Jan. 21 performance as of Dec.'07
Net assets2007Jan. 21
Fund name(000s)MER% return% return
Middlefield Income Plus25,3772.025.45-0.77
Middlefield Canadian Balanced Class9,7272.694.28-1.32
National Bank Dividend1,219,7021.71-1.61-1.50
BMO Asset Allocation850,0482.022.87-1.74
Inhance Balanced - A1.51-1.79
National Bank Monthly Income240,5571.682.73-1.81
CIBC Diversified Income81,7242.035.33-1.86
Desjardins Canadian Balanced394,4222.14-1.34-1.97
Mackenzie Univ Canadian Balanced432,8222.417.13-2.00
GGOF Cdn Balanced Classic4,7961.823.04-2.06
BonaVista Global Balanced-A3,0921.251.09-2.07
Dynamic Dividend Income1,161,0732.243.15-2.10
CI Signature High Income3,797,5641.540.13-2.12
Tmpltn Balanced30,6212.13-1.38-2.18
Renaissance Canadian Balanced Value485,9822.11-0.74-2.25
Radiant All Income Portfolio65,9142.400.48-2.28
Inhance Monthly Income - A2.94-2.31
TD Monthly Income4,694,7681.413.12-2.32
Mackenzie Ivy Growth & Income2,752,3562.14-2.76-2.33
Ethical Balanced373,1822.192.88-2.37
Mackenzie Balanced223,5682.42-0.86-2.40
CIBC Monthly Income7,036,9151.421.93-2.44
Trimark Income Growth - SC1,059,5191.63-8.10-2.45
Axiom Balanced Growth Portfolio408,2812.261.36-2.48
Meritage Equity Income Portfolio30,7242.52-1.39-2.48
as of Dec.'07
Net assets2007Jan. 21
Fund name(000s)MER% return% return
HSBC Canadian Balanced-I485,6691.980.96-2.50
Desjardins Alternative Investments809,0072.550.25-2.51
TD Balanced Growth1,300,3552.131.50-2.52
CI Signature Canadian Balanced1,548,1182.342.50-2.53
Manulife Monthly High Income Fund3,695,5012.114.42-2.54
Mackenzie Maxxum Monthly Income268,2482.44-2.47-2.55
Brandes Sionna Canadian Balanced193,5142.28-2.41-2.57
MD Dividend1,405,6221.432.54-2.61
Quadrus Trimark Balanced Fund8,7292.89-9.14-2.69
Desjardins Quebec Balanced208,4552.1911.54-2.71
CI Signature Income & Growth2,511,7142.331.79-2.72
Fidelity Monthly High Income-A94,5592.304.36-2.74
Trimark Select Balanced1,950,4112.31-8.86-2.76
IA Clarington Canadian Balanced252,5352.671.91-2.76
Investors Mutual of Canada-A2,624,5452.692.69-2.77
MD Balanced552,5031.431.61-2.80
Bissett Dividend Income-F40,3461.25-1.89-2.80
IG AGF Canadian Balanced-A519,7952.962.63-2.80
Saxon Balanced Fund504,0811.864.24-2.81
Trimark Monthly Inc Private Pool-T6110,3322.05-2.67-2.81
Renaissance Canadian Balanced479,3462.14-1.91-2.83
Sceptre Income & Growth - A53,6011.742.30-2.84
Altamira Growth & Income81,4051.616.07-2.85
RBC Tax Managed Return1,873,6611.863.15-2.85
TD Dividend Income3,291,6801.940.05-2.87


© 2007 The Globe and Mail. All rights reserved.

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