Peace of Mind Investing and Monthly Income: The Smart Balance

It’s important to maintain balance in life. We as human beings try to maintain balance in the time we stay awake and the time we go to sleep. There is a balance in the food we intake, in the amount of activity we partake, and the time we spend with friends and family. Everyone knows that market movements are unpredictable. So, we should also endeavour to seek balance when investing.

A balanced fund seeks to achieve growth through exposure to equities while providing defence and stability through exposure to bonds/fixed income. That way, you can count on having more stability in your portfolio as it grows over time, which helps with creating a desired peace of mind.

Balanced funds in the form of traditional mutual funds have been the go-to investment by many for a long time, but there is change in the air. Exchange-traded funds (ETFs) are gaining ground in the balanced portfolio space. Today, I want to zero-in on an ETF that is designed to offer the peace of mind that is afforded with a balanced portfolio. Better yet, this balanced ETF also delivers high monthly cash distributions.

Why balanced portfolios have reigned supreme

Readers will be familiar with how a mutual fund was chosen for them. First, you meet with your neighbourhood financial advisor or investment broker. Then, after you chat about your families and the weather, you get down to business. Your advisor will fashion a profile that fits your goals and risk tolerance. The final outcome boils down to your advisor picking a mutual fund that fits your risk profile.

Balanced mutual funds grew into the most popular option as they tend to hit the middle-ground of a given risk profile. Of course, investors today are on the hunt for other options.

The changing needs of investors in 2024

The new era of rising interest rates has put the spotlight back on GICs. Meanwhile, many investors were chanting the death of balanced funds, particularly the 60/40, when the inverse correlation between bonds and equity returns seemly disappeared. In other words, bonds were not providing the ballast in a balanced portfolio as they moved in lock step with equities. In the late fall of 2023, central banks signalled that they will look to reduce interest rates in 2024. A normalized investment environment may bring investment fund strategies that prioritize a balance of equities and fixed income back into focus.

As of end of 2023, balanced funds within mutual funds world accounted 47% of their  mutual fund assets, while in the ETFs world balanced funds were only 4% of total assets of ETFs. This may indicate that there’s room for balanced funds to grow among ETFs and offer a compelling alternative to the balanced portfolio in the form of mutual funds that are typically more expense due their operational structure. The ETF industry has enjoyed phenomenal growth over the past 15 years with its innovative alternatives to mutual funds.

The  most recent data as at the end of February 2024 tell the same story, IFIC reported that mutual fund assets totalled $2.01 trillion. Balanced mutual funds made up $923 billion of that total. Meanwhile, ETF assets reached a total of $403 billion at the end of February 2024. However, balanced ETF products only made up $16.5 billion of that total.

A New Path – An ETF with balance and high monthly income

The Harvest Balanced Income & Growth ETF (HBIG:TSX) launched on April 15, 2024. This ETF aims to blend the traditional peace of mind associated with a balanced portfolio with Harvest’s established covered call writing strategy. In keeping with the traditional balanced funds, you gain access to balanced growth with stability, a feature that investors have relied on for decades. Moreover, the added the use the covered call strategy provides a high monthly cash distribution, that investors need to help supplement income, a feature that’s not present in the traditional balanced fund.

For readers who are looking for even higher income, there is the Harvest Balanced Income & Growth Enhanced ETF (HBIE:TSX). HBIE seeks to provide unitholders with higher monthly cash distributions and the opportunity for capital appreciation by investing, on a levered basis, in a portfolio that seeks to replicate HBIG. It employs modest leverage at around 25% to produce both higher monthly cashflow and growth prospects. With the use of leverage, HBIE risk rating will be relatively higher relative to HBIG.


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For Information Purposes Only. Commissions, management fees and expenses all may be associated with investing in Harvest Exchange Traded Funds (managed by Harvest Portfolios Group Inc.). Please read the relevant prospectus before investing. The ETF is not guaranteed, its values changes frequently and past performance may not be repeated. This communication should not be considered as advice and/or a recommendation to purchase or sell the mentioned securities or used to engage in personal investment strategies. Tax, investment and all other decisions should be made with guidance from a qualified professional.

Certain statements in this communication are forward looking Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS.FLS are not guarantees of future performance and are by their nature based on numerous assumptions, which include, amongst other things, that (i) the Fund can attract and maintain investors and have sufficient capital under management to effect their investment strategies, (ii) the investment strategies will produce the results intended by the portfolio managers, and (iii) the markets will react and perform in a manner consistent with the investment strategies. Although the FLS contained herein are based upon what the portfolio manager believe to be reasonable assumptions, the portfolio manager cannot assure that actual results will be consistent with these FLS. Unless required by applicable law, Harvest Portfolios Group Inc. does not undertake, and specifically disclaim, any intention or obligation to update or revise any FLS, whether as a result of new information, future events or otherwise.