Types of mutual funds
The types of funds and what they invest in include:
- Money market - Short-term fixed income securities like treasury bills
- Fixed income - Fixed income securities like government bonds and corporate bonds
- Growth or equity - Equities like stocks or income trust units
- Balanced - A mix of equities and fixed income securities
- Global - Foreign equities or fixed income securities
- Specialty - Equities or fixed income securities in a specific region (for example, Asia) or sector (for example, information technology), and
- Index - Equities or fixed income securities chosen to mimic a specific index, such as the S&P/TSX Composite Index
Advantages of mutual funds
As an investment, mutual funds offer three main advantages.
1. Professional management
First, mutual funds provide an affordable way for individual investors to benefit from professional investment management, because the cost of managing the fund is shared amongst all the investors.
2. Easy way to diversify investment
Second, mutual funds are an easy and low-cost way for individual investors to diversify their investment portfolio. All investments come with some risk, but by purchasing several investments and diversifying your investment portfolio, you can lower your overall investment risk. For individual investors to diversify on their own can be expensive. But because mutual funds represent ownership in a wide variety of investments, buying shares in a mutual fund will help an investor diversify their investment portfolio and minimize their overall investment risk at a relatively low cost.
Third, most mutual funds are very liquid investments. It is fairly easy for investors to buy or sell mutual fund units. There are a wide variety of mutual funds available. You can contact an Investment Advisor for more information about what mutual funds are available. An Investment Advisor can also help you to determine which funds meet your investment objectives.
For more information about investing, visit the Ontario Securities Commission at www.osc.gov.on.ca
This article covers Ontario and/or federal law. © 2015 Licence and content provided by Legalline.ca