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  5. TML3252: I hold the Franklin Quotential Diversified Income Portfolio Series F (TML3253) mutual fund in my RRSP. [Franklin Quotential Diversified Income Port A]
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Q: I hold the Franklin Quotential Diversified Income Portfolio Series F (TML3253) mutual fund in my RRSP. It accounts for about 10% of my entire portfolio. I pretty much ignore it, mostly because I find bonds hard to understand. Do you think retirees need bonds in their portfolio if they hold a lot of dividend stocks and funds like FIE and EIT, plus keep a years worth of cash to live on outside of the market? If yes, would you continue to hold this fund or move into a bond ETF? And what ETF would you suggest? And if no bonds, what would you suggest moving the fund into? Thank you.
Asked by Kim on June 20, 2025
5i Research Answer:

We can't of course speak for all retirees, but bonds can still play a role in portfolios for conservative investors. Bonds are getting a bad rap right now, as we've only just recovered from the worst three-year performance record in history, with two down years and a barely-positive third year. But in a normal market bonds provide ongoing cash flow and stability, and can offset overall portfolio market volatility. They are not 'bad' investments most of the time. For retirees with a pension, they are likely far less necessary. A year's worth of cash helps, but of course stock markets might decline for more than one year. Each situation is different. We are OK with 'no' bonds if circumstances and risk profiles and timeframe permit that. The fund noted does have a bit of equity exposure as well. Since-inception return is 4.37% (class F) and five-year 2.84%. Not hugely impressive considering MER of 1.72% (Class A) and 0.90% (Class F). We have no issues with its set-up or structure. It lost money in 2018 and a larger amount in 2022. Still, its performance looks better on a five-year performance vs ETFs. Because of the aforementioned decline in the sector, many bond funds are showing negative five-year returns. XGB is -1.35%. XBB is -0.35%. A balanced fund such as VBAL (60/40 stocks bonds) is higher at 7.58% but risks are also higher. VGAB (global) is -1.44%. So, for now, considering all this, we would be comfortable keeping the Franklin fund.