Topic: How To Invest

Q: Pat: Can I have your recommendation on these two mutual funds: Fidelity Income Allocation Fund and the Manulife Yield Opportunities Fund? Thanks.

Article Excerpt

A: We have moved away from recommending mutual funds in favour of lower-fee exchange-traded funds (ETFs). However, some mutual funds are okay to hold if you own them. The Fidelity Income Allocation Fund is a tactical asset allocation fund. These funds shift their portfolio allocations between stocks, bonds and cash in order to capitalize on perceived investment opportunities in any one of those classes. For example, if the managers feel that the bond market is depressed and poised for an upswing, then they may overweight the portfolio in fixed income for a few months. The fund is currently 67.2% in bonds, 24.1% in stocks and 8.7% in cash. We think that asset allocation is vastly overrated as an investment tool. Asset allocation rose to prominence because the investment industry seized upon some academic research on the subject. Some investment firms turned it into a sales pitch for investment products that carry much higher fees than “plain vanilla” stocks and bonds. More to the point, we…