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Mutual Fund News

A balanced approach, without deadwood

rcarrick@globeandmail.com

What we're looking at

Balanced funds are far and away the most popular type of mutual fund these days, with net sales for the year through April 30 of $12.7-billion. Today's screen is designed to help investors find consistent balanced funds that have performed well over both the short and long term.

Our screen

The value of owning a balanced fund is instant diversification. In this screen, we've included Canadian balanced funds that hold stocks and bonds in roughly equal proportions (neutral balanced), and that emphasize stocks (equity balanced) and bonds (fixed-income balanced). The next step was to gather the funds that have produced first- or second-quartile returns for 12 months and 10 years to April 30. Quartiles divide funds in a category into four groups by performance - one is best and fourth is worst.

Funds are ranked here from highest average annual 10-year on down. (We have space for the top 25 here, for all 33 funds please go to tgam.ca/cruncher.)

What we found

You can see today's tough investing environment reflected in the fact that many funds in our screen have lost money in the past 12 months and yet still rank in the first or second quartile. The funds that really stand out here have managed to blend good returns both in the past year and the past decade.

Be careful in interpreting these results, though. Funds may have flourished in the past year because they hold a lot of bonds. When interest rates rise, a heavy bond weighting will drag down a balanced fund. These funds will also lag if we ever get a sustained rally in stocks. Suggestion: Use the fund profiles on Globeinvestor.com to do further research on any funds on this list that look good to you.

Be a choosy consumer of balanced funds. They're hugely popular right now, but there's plenty of deadwood in the category.

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TOP CANADIAN BALANCED FUNDS (1ST OR 2ND-QUARTILE RETURNS FOR 12 MONTHS & 10 YEARS TO APRIL 30

FundAssets ($ thousands)MERMinimum initial investment ($)1-year return10-year return
Middlefield Income Plus-A76.921,0000.32%9.95%
TD Monthly Income5,999.41.481002.71%8.51%
Manulife Monthly High Income Fund5,341.72.185001.97%7.47%
RBC Monthly Income8,192.91.185002.62%7.21%
CIBC Monthly Income6,713.81.48500-0.84%6.84%
TD Dividend Income-I4,844.22.041001.28%6.57%
Fidelity Canadian Balanced-A1,458.02.27500-1.44%6.34%
Educators Balancedn/a1.75n/a-1.65%5.92%
Counsel Fixed Income-A106.52.331,0004.57%5.87%
Middlefield Income and Growth Cl-A7.32.531,0000.03%5.80%
AGF Fixed Income Plus188.42.415004.70%5.72%
Desjardins Quebec Balanced229.52.191,000-1.27%5.31%
BMO Monthly Income4,904.51.575001.28%5.29%
Beutel Goodman Balanced-D2,136.21.245,0001.35%5.23%
Mackenzie Sentinel Income Fund Sr A513.01.915002.52%4.97%
Bissett Canadian Balanced-F86.71.085000.67%4.96%
TD Balanced Index69.50.891000.71%4.86%
Quadrus London Capital Inc Plus268.92.225004.46%4.77%
Trimark Diversified Income Class-T8430.32.16500-0.77%4.75%
FMOQ Omnibus475.30.95500-0.30%4.75%
National Bank Dividend988.81.765002.02%4.26%
CIBC Balanced Index35.21.16500-0.58%4.24%
Fiera Sceptre Balanced Fund Class Bn/a1.795,000-0.57%4.22%
Mackenzie Sen Mgd Return Class73.21.85005.08%4.12%
Quebec Professionals Balanced619.51.082,500-0.31%4.06%
Source: Globeinvestor.com

© 2007 The Globe and Mail. All rights reserved.

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