Well, we think we've learned that simply paying more for a mutual fund, in the form of a higher MER, does not guarantee better performance. We've learned that the name of a fund may not reflect how it has performed in the past nor how it will do in the future. Just because it claims to be comfortable guarantee that it will be. We've learned that sometimes owning two funds is better than owning just one.
Now, to throw a monkey wrench into all of it. How a fund has performed is based on the time frame under discussion. Nothing is certain in life and the stock market follows this maxim. All we know for sure is how our five funds performed over the time we've operated our sham portfolios. Let's take a look at a longer time frame. We'll only go back three years as one or two of our funds are quite new.
Over the last three years, the Dividend Growth fund (dark blue line) has outperformed all the others after getting past the hurdle of January 2016 when it dove to the bottom of the pack. That was a stressful time for some of those holding this fund but in the end the fund performed as expected. But, let's admit that stress comes with owning this fund. It gyrates up and down more than any of the others. It's a great ride, and in the end worth it, but many would be unable to hold on through the down times.
The Comfort fund comes in second but it's often bested by the Monthly Income and not because the Monthly Income has been such a stellar performer. No, the Comfort fund was simply not all that comfortable to hold. It was a bit volatile. In the end the Comfort fund and the Monthly Income finished in almost a dead heat.
Whatever happened back in January 2016 allowed the Retirement fund to shine. But note, it did so only because all the other funds did so poorly. The moment the others gained their footings, they pulled ahead of the Retirement fund and never looked back. Today an investor in the Retirement fund has little more than what they originally invested. Is this the performance retirees want from an investment? If this is what makes them happy, maybe they should simply buy a GICs.
Before ending this post, let's take a quick look at one other time frame: one year.
In this scenario, the Retirement fund is in first place. What I think is important to note is that it is in the red. Yes, the retiree investor would have been better off with a GIC. Heck, in the past year, they'd have done better putting their money under their mattress.
The Dividend fund is at the bottom. Hmmm. Every year I put money aside for my granddaughters' education. I usually stick it in the TD Monthly Income. Maybe I should consider putting a little in the Dividend Growth fund, too. I will definitely buy some units of the Dividend fund for my granddaughters when the next bear market hits.
In the past year, the Comfort has both lead the pack and trailed it. When one inspects its holdings, one can see the logic behind this fund. It is not a dog but it is certainly not comfortable. Aggressive? Yes. Comfortable? No. At one year it is being outperformed by the Monthly Income, a far more comfortable investment.
But do notice that all funds are down after one year. Not one of the funds being tracked is in the black. Trust me. If this were real money and it was yours, you'd be uneasy. Losing money is not easy. And the near future promises to be just as difficult, if not worse. The drop you see is not even a correction, which is a 10% drop. When the bear market eventually roars in bringing a drop of 20% or more in market value, the air will be thick with panic. If one is caught holding the wrong mutual fund, you may never get your money back.
This is what happened to my $4200 that I invested with Freedom Fifty about twenty years ago. The investment went down to $1700 and never fully recovered. I am still waiting for my $3150 guaranteed payout. If I had put the money in the TD Monthly Income fund instead, I'd have better than $14,000 today and it would be immediately available to boot.
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