A mutual fund stock (mutual funds stock), bond investment, money market instruments and other assets, is an investment vehicle made up of pool of money collected from many investors for the purpose of investing in securities.
Mutual funds (mutual funds) are operated by a professional money manager, who allocate funds to the fund and seeks capital gain and / or income for the fund’s investors. A portfolio of mutual funds is protected and matches the investment objectives mentioned in its prospectus.
Types of mutual funds
- Money market fund
- Fixed income fund
- Equity fund
- Balanced money
- Index fund
- Specialty wealth
- Fund of fund
Types of mutual funds Exaplain
#1. Money market fund
These funds invest in short term fixed income securities such as government bonds, treasury bills, acceptance of bankers, commercial paper and deposit certificates. They are usually a safe investment, but other types of mutual funds, with less potential return.
The Canadian Money Market Funds try to keep their Net Asset Value (NAV) at $ 10 per safe.
#2. Fixed income fund
These funds buy investments which pay a fixed rate of returns such as government bonds, investment-grade corporate bonds and high-yield corporate bonds. Their goal is to get money in the fund on a regular basis, through the interest earned through most funds.
High-yield corporate bond funds are generally more risky than those with government and investment-grade bond holding funds.
#3. Equity fund
These funds invest in stocks. The purpose of these funds is to grow faster than the money market or a fixed income fund, so there is usually a big risk because you can reduce the money.
You can choose from various types of equity funds, which include increase shares (which usually do not pay dividends), income funds (which pay large dividends to the shares), value stocks, large cap stocks, mid- Cap stocks, small cap stocks, or combination of these.
#4. Balanced money
These funds invest in a mix of equity and fixed income securities. They try to balance the purpose of getting high returns against the risk of losing money. Most of these funds follow a formula to split the money between different types of investments.
They have higher risk than fixed income funds, but there is less risk than pure equity funds. In aggressive funds there are more equity and lower bonds, whereas conservative funds have less equity relative to Bond.
#5. Index fund
The goal of these funds is to track the performance of specific index like S & P / TSX Composite Index. The price of mutual funds in the form of the index up or down will go up or down.
Index funds generally have lower costs than actively managed mutual funds because the portfolio manager does not need to do much research or make investment decisions.
Active VS reciprocal management
Active management means that the portfolio manager buys and sells the investment, returns to the overall market or tries to better perform other identified benchmarks. Inactive management involves buying a portfolio of securities designed to track the performance of the benchmark index. Holdings of the fund are adjusted only when there are adjustments in the components of the index.
#6. Specialty wealth
These funds focus on special mandates such as real estate, commodities or socially responsible investments. For example, socially responsible funds can invest in companies that support environmental caretiveness, human rights and diversity, and can avoid alcohol, tobacco, gambling, weapons and companies involved in the military.
#7. Fund of fund
These funds invest in other funds. Like balanced money, they try to simplify asset allocation and diversification for the investor. MER is more than a stand-alone mutual fund for fund-of-fund.
Before investing, understand the fund’s investment goals and ensure that you are comfortable with the level of risk.
Even if two funds are of the same type, their risks and withdrawal characteristics may not be the same. Learn more about how mutual funds work. You may also want to talk to a financial advisor to help you decide which type of fund fulfills your needs.
Variety by investment style
Portfolio managers may have different investment philosophies or different styles of investment can be used to meet the investment objectives of a fund. Choosing a fund with different investment styles allows you to diversify beyond the types of investment. This could be another way of reducing investment risk.
4 Common Approaches to Investing
#1. Top-down approach – looks at the big financial picture, and then finds those industries or countries that seem to be going well. Then invest in specific companies within the chosen industry or country.
#2. Bottom Approach – Focusing on choosing specific companies that are doing well, it does not matter what the possibilities are for their industry or economy.
#3. A combination of top-down and down-up approaches – A portfolio manager who manages a global portfolio can decide which countries can favor bias based on the top-down analysis, but based on the bottom-down analysis Within each country, the portfolio of stocks can be built.
#4. You can learn about a fund’s investment strategy by reading your fund facts and simplified prospectus.
Mutual fund companies often associate with the advisors and encourage them to sell their money. When you choose a consultant, find out whether they focus on the wealth of a certain company or the wealth of the particular family.