OK, before you hit that unfollow button I am not suggesting that Canada’s largest mutual fund is great. That said, even with the high fees the returns have been very solid. Many Canadians have been able to build considerable wealth in some of Canada’s largest mutual funds. Let’s start with a look at the RBC Select Balanced Portfolio. It’s good.
Please note, I’ve updated this post to include the pandemic period. Returns are updated year to date, and for a one year period to August 2020. Below that section I also updated returns for 2020 vs the iShares one ticket benchmarks.
RBC Select Balanced Portfolio.
It has over $38 billion in assets under management AUM. The MER is 1.94%. The last trading expense ratio listed was .06% taking the total fees to 2.0%.
Obviously this is a very ‘long running’ mutual fund. Many mutual funds get shut down or merge due to poor performance. The mutual fund industry likes to hide their mistakes and poor performance. Easy enough to just take them out of sight. Given that, it’s possible that other funds have been merged into this popular fund.
And it did not take long to find this on the site.
- This is a continuing fund resulting from a merger effective June 27, 2014.
I will look into the history. But this should be a continuous trail of funds or switches for RBC clients or fund investors who have been in this balanced asset allocation model.
The fund or series of funds has been able to grow monies almost 8 fold. If one was investing on a regular schedule they should have been able to build significant wealth. That wealth building would have been largely dependent upon the savings rate. Decent returns are present and accounted for.
Here’s the history to end of November 2019 …
That’s not too bad. It trails the lower fee Tangerine Balanced Portfolio in modest fashion by .4% annual over the last 10 years. There is some slight out-performance of the assets and the asset allocation compared to the simple Tangerine index-based approach. But that ‘out-performance’ is eaten up by the higher fees.
This is an asset allocation portfolio.
It has 35 holdings. Now that’s a busy fund. I was also able to find this …
The recent returns update.
RBC’s Balanced Portfolio has held up quite well in the recent market correction.
- Year to date (to August 6) the fund is up 3.6%
- One year return 7.5%
As a benchmark, iShares one ticket XBAL Balanced Portfolio.
- Year to date the fund is up 4.6%
- One year return 10.2%
2020 returns vs benchmark.
- RBC Balanced Portfolio, up 10%
- iShares XBAL, up 10.6%
Canada’s second biggest fund.
Next up we’ll look at the second largest fund in Canada. Here’s the more conservative Balanced Income portfolio model from RBC.
The Select Conservative Portfolio.
The returns for this portfolio have been quite solid.
Once again, the fees can get in the way in modest fashion. But a Canadian would have been able to create significant wealth in this conservative model over time.
The recent returns update.
- Year to date (to August 6) the fund is up 4.3%
- Over a one year period the returns are 7.1%
Benchmark Vanguard Conservative one ticket VCNS.
- Year to date the fund is up 5.5%
- Over a one year period the fund is up 8.5%
2020 returns vs benchmark.
- RBC Select Conservative Portfolio, up 9.5%
- iShares XCNS, up 10.3%
Next in line big dividends from RBC.
The RBC Canadian Dividend Fund. Yes even mutual fund investors like their big dividends.
The returns have been lackluster. Investors are handing over a generous portion of the dividends and returns to RBC, and well, to me too as I am a RBC shareholder. Stop giving me your money. Please. I’ll be OK.
That fund is under-performing by about 2% annual. That is significant of course. The simple TSX 60 ETF XIU has delivered 7% annual over the last 10 years.
Dividend funds are not keeping up with the benchmark thanks to Shopify. And that is, for not holding Shopify. And that would be impossible of course as that great Canadian tech company does not pay a dividend. Shopify and materials (gold) has been driving the core Canadian index returns.
- Year to date (to August 6) the fund is down 10.6%
- Over a one year period the fund is down 7.4%
2020 returns vs benchmark.
- RBC Canadian Dividend down 2.5%
- Canadian benchmark average down 3.6%
Here’s the performance of the Canadian Dividend ETFs for 2020.
The returns of the RBC Canadian Dividend Fund is certainly in line with ‘average’ returns.
Rob Carrick looked at Canada’s top 100.
In June of 2018 Rob Carrick of the Globe had looked at the largest 100 mutual funds in Canada. Here’s a snip of the top funds. I am assuming, given the growth in assets that the top 2 funds have held their positions.
What was interesting is that the top 100 only trailed their passive benchmarks by a modest amount. Below, the .85% represents the percentage under-performance vs the benchmarks. The 1.9863 figure represents the average MER of the top 100 funds.
Why do investors do so poorly?
Too often it’s bad behaviour. Investors are investing outside of their risk tolerance level. They get nervous in periods of market corrections, and they sell when the markets are down. They do not stay invested. Buy high, sell low.
When I was performing portfolio evaluations as an advisor at Tangerine Investments, I found the problem was often the fund choices of their external advisors. They were in a ragtag mess of funds all too often. There was a lot of fund switching used by advisors to create fees (for themselves). I would often witness returns well below that of savings accounts and GICs.
There are obviously many ‘solid’ mutual funds available. And if you have a fee-based advisor they can put you in the F-series mutual funds that will chop the fees considerably. There are lower fee offerings from Tangerine, Steadyhand, Mawer and Leith Wheeler.
That said, we can often do better with lower fees and ETFs. We can lower fees even more if we create a portfolio of individual stocks.
Should you switch to ETFs?
To invest in ETFs you would have to self-direct your own investments. I think that’s the ideal route if you have the confidence and enough knowledge. You can access the greater financial plan by way of an advice-only planner.
For investment advice and a managed portfolio you can go with one of the Canadian Robo Advisors.
If you’re having a good experience with a sensible Balanced asset allocation mutual fund such as the RBC Select Balanced Portfolio you may decide to stay the course. You may have a sensible collection of Canadian, US and International mutual funds, you may be managing the risk with bond funds. Your behaviour and savings rate will be more important.
But always keep in mind those higher fees usually eat away at returns over time. All said, I’ll admit I am pleasantly surprised by these two solid balanced funds from RBC.
If you’d like a portfolio evaluation opinion you can send me a note via that contact form. Or if you think you’re getting some ‘weird’ advice from your advisor I am happy to weigh in.
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