Mutual Funds
A Mutual Fund is a professionally managed pool of investments. As an investor, you can purchase units in the fund which represent your fractional ownership. The investment manager uses the money in the pool to purchase various investments on behalf of all its investors.
Diversification
One of the main advantages provided by Mutual Funds is diversification. An investor with $100 invested in a Mutual Fund gains the same level of diversification as someone with $1,000,000 in the same fund. The Mutual Fund manager delivers diversification by purchasing many different investments including stocks, bonds, real estate investments, and short-term interest bearing investments. Depending on the Mutual Fund, the investments may also be selected from different sectors of the economy, as well as various geographic regions around the world to provide further diversification.
Professional Management
Mutual Fund investors benefit from having their money managed by investment professionals with years of experience and advanced training. Those who do not feel comfortable making their own investment decisions can delegate these tasks to a professional team of managers.
Convenience
Mutual Funds allow investors with small amounts of money to access the capital markets. Many Mutual Funds allow investors with as little as $50 per month. With the advent of PAC (Pre-Authorized Chequing) payments, Mutual Fund investors can conveniently invest small amounts of money on a regular basis. Even small investments made regularly can add up significantly over time.
A Mutual Fund for Everyone
Mutual Funds are not inherently risky. There are thousands of Mutual Funds in Canada ranging from extremely conservative to speculative and everywhere in between. Whatever ones risk tolerance and objectives, there is a suitable mutual fund available. Mutual Funds also offer the added advantage of specialty funds which focus on certain types of investments, geographic areas, or industries for more sophisticated investors.
What are the costs?
Mutual Funds charge an MER (Management Expense Ratio) to their investors. The MER is expressed as a percentage and is charged against the total assets in the fund each year. Most Mutual Fund MERs range from 1% to 3% and depend largely on the complexity of the fund. Mutual Fund investors with larger sums to invest can often obtain lower fees.
Commissions, trailing commissions, management fees and expenses may all be associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the simplified prospectus before investing.
