By Tom Bradley

In Saturday’s Report on Business, there was a remarkable table embedded in Rob Carrick’s article (How to Shelter Your Portfolio From a Housing Decline). It showed the top 10 Canadian equity funds (by assets) and the top 10 Canadian dividend income funds.

What struck me was the puny size of the biggest Canadian equity funds. Outside of the iShares S&P/TSX 60 Index Fund ($11.5 billion), which is an ETF that’s used mostly by institutional investors, the next largest fund was RBC’s Canadian Equity Fund at $2.3 billion. The 10th largest fund was under a billion dollars.

The list of dividend funds, on the other hand, was considerably deeper and shows where Canadian mutual fund investors have focused their portfolios. The largest fund was again RBC’s (RBC Dividend - $10 bln), followed by TD Dividend Growth ($5.5 bln), Scotia Canadian Dividend ($3.5 bln), BMO Dividend ($3.3) and Sentry Canadian Income ($2.5 bln).

I recognize that conventional mutual funds are in decline, but the lists confirm a point we’ve been making over the last year – with the steady shift to stable, income-oriented stocks, Canadian portfolios have become less diversified. For example, the dividend income funds in the table are heavily tilted toward financial services stocks and own few resource, technology and industrial stocks.

With the solid past performance of income-oriented stocks, it’s easy for investors to lose track of where their portfolios have crept. I say that because I firmly believe a portfolio narrowly focused on Canadian banks, pipelines and REITs will significantly underperform a well-rounded one that includes small, medium and large companies in a range of industries and geographies.