Mutual Fund Benefits
Mutual funds offer a variety of benefits, including professional investment management, reduced risk through diversification, liquidity and convenience. Below is a summary of these four main benefits that have made mutual funds a popular investment among Canadians.
Professional Investment Management
Mutual funds offer the experience and skill of a professional investment manager (fund manager) or team of investment managers you may not have access to otherwise. In addition, operating costs are spread among unitholders, thereby minimizing the expense of professional investment management.
The mutual fund's investment objectives are established by the mutual fund company. The three main objectives are safety of capital, income and growth. Each one of these investment objectives carries a certain risk factor and it is important to understand the risk/return ratio associated with each mutual fund's investment objectives before you invest in a particular mutual fund.
Once the investment objective of the fund has been set, it is the responsibility of the fund manager to manage the mutual fund portfolio within the established investment objectives of the fund. Depending on the investment management style, the fund manager will research and invest in individual securities that meet the investment objectives of the fund. The fund manager also monitors performance, reviews research and sets strategy.
Reduced Risk Through Diversification
Mutual funds provide an efficient way to achieve diversification within an individual's investment portfolio. The mutual funds' assets are invested in a number of different securities which reduces the impact of market or economic changes on any one security or asset class.
To achieve a diversified mutual fund portfolio, the fund manager will invest the mutual fund assets in a number of ways, which may include selecting securities in different companies, industry sectors, asset types, geographic areas, by currency or by employing a " fund of funds' " structure.
Mutual funds are liquid investments. Mutual fund investors may redeem all or any portion of their shares/units on any business day (restrictions may apply. Please read the fund's prospectus for more details, or contact your CIBC Wood Gundy Investment Advisor.) and receive the current net asset value per share (NAVPS). The NAVPS of the mutual fund is usually calculated every business day and is based on the market value of the individual securities within the mutual fund portfolio.
Mutual funds are a convenient way to invest both inside and outside of a registered retirement savings plan. Mutual funds as an RRSP investment allow investors to plan for their retirement conveniently and efficiently. Investors appreciate the ease with which they can monitor and compare the performance of Canadian mutual funds they own (or plan to purchase) by reviewing the financial pages of most daily newspapers.
In addition, CIBC Wood Gundy provides investors with a convenient and efficient way to meet investment goals by offering Systematic Investment Plans. Many of these plans operate under a dollar cost averaging scenario.
Automatic reinvestment of distributions and free transfers between mutual funds of the same family are additional features offered by many mutual fund companies.
All of these plans and features help make mutual funds an attractive and convenient investment for your portfolio.
A CIBC Wood Gundy Investment Advisor knows the full range of mutual fund investments currently available in the marketplace, and has the analytical tools and expertise to identify those investments which will best meet your financial goals.
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