We’re all investingin something important to our future. Whether it’s creating your ideal retirement, funding your child’s education, or saving for your dream home, investing wisely now will help make your life feel richer down the road.
The future is the great unknown right now, but what actions can you take today to secure it? Furthermore, what actions can you take that will result in substantial returns when you’re ready to cash out?
Even if you’re just getting your portfolio started, or haven’t even started at all, you’ve likely heard of others investing in mutual funds. Let’s get deeper into what they are, how they work, and what types are available for you to invest in.
They’re called mutual funds for a reason! In the stock market, investors buy shares from one another. But, with mutual funds, investors buy shares right from the fund, usually through a mutual fund advisor who will buy them for an investor.
Mutual funds are investments that pool money from many different people and invest those funds for specific objectives. Each shareholder of this pool of money participates proportionally in the gains or losses of the fund. You can buy funds in your non-registered or registered account, such as a Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP), or Registered Retirement Income Fund (RRIF).
Now that you know what mutual funds are... how do they work? You might have some of these questions, and we can answer them.
Mutual funds are managed by fund managers. They can work well for all types of investors, especially smaller investors who can see the potential of lower returns, but also potentially gain high returns through access to higher-yielding securities, such as stocks and bonds/
There are some quite strong advantages to mutual funds, including:
One of the greatest advantages of mutual funds is how they allow you to diversify your portfolio. You can invest in many different types of mutual funds, with stocks and bonds being the most common.
You don’t have to be a stockbroker to get the most out of your investment with mutual funds. You can add your contribution to the pool, and let it get sorted out with the rest for the best results.
Your mutual fund portfolio is managed more by a portfolio manager on your behalf, so you don’t have to be tuned into the market 24/7 to know your investments are in good hands.
Mutual funds also present a few caveats that are worth thinking about:
Just like anything related to investing, you choose to undertake a significant amount of risk when you choose a mutual fund. It may dip low, and it also may take a longer time to see a return, but mutual funds also have the potential to earn more over the long run.
As mentioned earlier, mutual funds are entirely managed by parties monitoring market changes and making decisions in the best interest of your portfolio. This work comes at a cost, called a management expense ratio, and varies depending on how managed the fund is.
You know what they say: Sometimes, you have to spend money to make money, and mutual funds often come with strings attached. All mutual funds have fees or commissions that could eat into your investment.
Now that you have a rundown of what mutual funds are and how they work, how do you know if they’re the right investment tool for you?
Want to get started investing in mutual funds? Book an appointment and speak with an advisor about how mutual funds fit into your overall financial roadmap.
Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc. Financial planning services are available only from advisors who hold financial planning accreditation from applicable regulatory authorities.
NEI Investments is a registered trademark of Northwest & Ethical Investments L.P. Northwest & Ethical Investments Inc., is a wholly owned subsidiary of Aviso Wealth Inc. (“Aviso”). Aviso is a wholly owned subsidiary of Aviso Wealth Limited Partnership (“Aviso Wealth LP”), which in turn is owned 50% by Desjardins Financial Holdings Inc. (“Desjardins”) and 50% by a limited partnership owned by the five Provincial Credit Union Centrals (the “Centrals”) and the CUMIS Group Limited. Aviso Financial Inc. and Northwest & Ethical Investments l.P. are all wholly owned subsidiaries of Aviso Wealth Inc.
Speak to an advisor on the phone or at a branch.
We acknowledge that we have the privilege of doing business on the traditional and unceded territory of First Nations communities.
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