Mutual Funds

A mutual fund is a trust or a company whose purpose is to manage investments for third parties. The fund sells units to investors. These units are then invested in accordance with the investment policy and objective of the fund, established when the fund is created.

A manager is charged with following up on the investment fund portfolio on a daily basis. The manager negotiates securities according to the instructions outlined in the in the fund charter and prospectus. The manager must respect the restrictions imposed by the provincial securities commissions.

The manager must also keep a portion of the fund assets liquid, in order to be able to redeem shares on request from shareholders. Your investment advisor acts as distributor for the fund through the brokerage firm.

Risk Level

Mutual funds have several advantages:

	low-cost professional management;
	they allow for wide portfolio diversification by providing access to a broader range of securities;
	since there is a large number of fund categories, it is possible to meet all investment objectives, from the riskiest to the least risky;
	it is a very liquid investment, since it is possible to dispose of one's shares at the liquidating value at any time.

However, this is not a good investment vehicle for investors who are seeking a short-term return. Most funds favour long-term investments.

A fund is not an appropriate reserve in the case of emergency, especially during periods of market downturn or an economic slowdown where buying or selling funds could result in a loss. Mutual fund shares can also suffer in times of market decreases when securities are sensitive to market fluctuations (inevitable risk).

The distributor, i.e., your investment advisor, is obligated to make sure that he offers you the best possible choice, taking into account the evaluation of your needs. He must clearly explain to you the objectives and terms of the various funds. He will then propose an informed investment that is in line with your profile.