Moneysense best mutual funds for 2007 (annual ranking)

Although a lot of people including myself promote using index funds instead of mutual because of their annual fees (MER : Management Expense Ratio). Many Canadian mutual funds will charge you in excess of 2% per year of MER. Other funds though give good performance for fees lower than 2%. I hold CHOU RRSP myself and it has done very well for me over the year. I am still moving to an index fund based RRSP to minimize the effect of fees over the long term. I might decide though to keep a mix of both. Why? Because some mutual funds like CHOU RRSP have a better bear market performance than indexes like the S&P TSX 60 for example. And I like having investments that are more resilient to downturns in the stock market.

So here are the top Moneysense mutual funds for this year (from their latest printed magazine issue). I've added my own twist of only including the top fund in each category that has an MER lower than 2% and a bear market performance of A or B.

Category	Fund	Rank	5 years annual return %	Bear Market Perf.	MER %	Min. Invest. $
Canadian Equity	Chou RRSP Fund	2	15.92	A	1.74	10000
US Equity	RBC O’Shaughnessy US Value Fund	1	11.32	A	1.57	1000
Canadian Balanced	CIBC Monthly Income Fund	2	12.36	A	1.42	500
Global Equity	Saxon World Growth	6	9.21	B	1.87	5000
Small Caps	Mawer New Canada Fund	1	24.15	A	1.5	5000
Canadian Bonds	TD Real Return Bond Fund-I	1	8.53	A	1.48	100

The Global Equity category does not fare well under my criteria, but Small Caps is amazing and Canadian Equity is very decent!

What does this mean? One possible conclusion is that mutual funds with fees under 2% can be a good alternative in some cases. It might be hard to know in advance which ones to pick though. I'll have to back test my strategy to see if there are any trends ...

If you are more comfortable with mutual funds than with index funds/ETFs then definitely go with low fee funds that have proven long term records like CHOU RRSP.

A good post on the value of index funds from Get Rich Slowly

The Get Rich Slowly blog tells us that index funds are recommended but that alternatives approaches (with stocks) could be better for some people. That's exactly what I'm trying outside my RRSP (I'll tell you how in a future post ...)