Our favourite core funds

These funds can be your portfolio's workhorses.

Christopher Davis 8 April, 2014 | 6:00PM
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As a boy, I always liked my dad's friend Joe, mainly because I was impressed by his sleek red 1964 Corvette Stingray. Fast, dangerous during the merest whiff of snow, and with a backseat barely worthy of the term, this wasn't designed to be a family car. Joe took it for a spin only occasionally, relying instead on a minivan to haul around his family of four. While the Corvette gave him a periodic thrill, the minivan was his family's workhorse.

Portfolios need workhorses, too. While investments with big returns and fat yields get a lot of the attention, steady Eddies should comprise the core of your portfolio. There's no one accepted definition of a core holding, but they are typically well diversified, with a focus on steadier large-cap domestic and foreign stocks and high-quality bonds. Entirely unflashy and eminently practical, these are the minivans of your portfolio.

This isn't to say you should exclude racier fare altogether. Relatively volatile asset classes, such as small-cap or emerging-market stocks, provide diversification, and a little pep, to otherwise mild-mannered portfolios. But these areas merely should supplement your core holdings. (You'll find our best ideas for non-core holdings here)

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About Author

Christopher Davis

Christopher Davis  Christopher Davis is Director of Manager Research at Morningstar Canada.

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