You’re comfortable in your chequing and savings accounts, and want to grow your money – you’re just not sure how. Your financial advisor might suggest mutual funds – only what are mutual funds? How does a financial advisor know which ones to recommend?
A mutual funds is money managed by a Fund Manager, collected and pooled into a trust or corporation from a number of investors who share a common investment objective. The income you earn from a mutual fund can vary and is considered taxable.
Before suggesting that a member diversify their portfolio with mutual funds, there are questions that are needed to be asked:
- What does the current market look like?
- What is the time horizon the potential investor is looking at?
- Is the investor interested in socially responsible investing?
- What is the investor’s risk tolerance?
These things help advisors determine not only if a mutual fund is appropriate, but what style of mutual fund is best suited for the investor, or what specific mutual fund would best suit their portfolio. If these questions aren’t asked by a financial advisor, it could lead to unhappy investors concerned about where their money is going and the rate of return on their investments. No one wants a poorly performing mutual fund!
A good advisor will want to dive deeper. Sometimes, if a mutual fund is performing poorly, it is reflective of a poor performing market in general. They should also be able to explain that a mutual fund’s time horizon – how long the money will sit in a mutual fund – or volatility in the market that year over year, month over month, means that the investment total can go up… and go down. The longer a member stays invested, the more likely they are to realize that mutual funds targeted return.
At Kindred, our focus has always been to diversify portfolios properly so returns aren't subject to just one market sector or investment type. Speak with a member of our Wealth and Investment team today to learn more about mutual funds.
Disclosure:
The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters. Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc. Aviso Wealth Inc. ('Aviso') is a wholly owned subsidiary of Aviso Wealth LP, which in turn is owned 50% by Desjardins Financial Holding Inc. and 50% by a limited partnership owned by the five Provincial Credit Union Centrals and The CUMIS Group Limited. The following entities are subsidiaries of Aviso: Aviso Financial Inc. (including divisions Aviso Wealth, Qtrade Direct Investing, Qtrade Guided Portfolios, Aviso Correspondent Partners), Aviso Insurance Inc., Credential Insurance Services Inc. and Northwest & Ethical Investments L.P.