A decision to invest in mutual funds raises many questions – not all of which have concrete answers. What is mutual fund investing? Are mutual funds worth it? What are the best mutual fund companies? And the list goes on. The answers to these questions depend on factors like your age, risk tolerance, level of investment knowledge and more. Here, we’ll take a look at the basics to help you make the investing decision that best suits your needs.
Mutual funds definition
For starters, offering a simple mutual funds definition may be best approached by answering this popular question: how do mutual funds work?
True to their namesake, mutual funds take your individual investment (the money you contribute) and pool it with the money of other like-minded investors into a larger, professionally managed fund. This allows you to own a wider variety of investments, which enables greater and easier diversification, and encourages greater returns on your money.
Are mutual funds worth it?
This question gets asked a lot. It’s also a tough one to answer, given that we all define investing success differently. If you’re looking for easy, overnight investing gains, the answer is a straight-up no. But, if your objective is straightforward investing, hands-off money management and long-term growth, then you’ll want to read on.
What are the advantages of mutual funds?
In addition to their ease of use and growth opportunities, mutual funds provide many benefits. Here are a few of the main ones:
They’re a simple way to diversify your portfolio
Markets are unpredictable. If they underperform, your invested assets could lose value. The trick is to diversify – or not put all your eggs in one basket – which means that a drop in one market segment doesn’t necessarily affect your entire portfolio. Mutual funds make it possible – even easy – to invest across products (like stocks, bonds, etc.), sectors (like technology, financial services, etc.) and geographies (both Canadian and international) to reduce your investing risk.
They offer access to professional fund management
A Mutual Fund Investment Specialist can help you choose the types of mutual funds that work for your goals, your risk tolerance and your time horizon. From there, professional fund managers – experienced in navigating various market conditions – monitor the funds and make day-to-day investment decisions, so you don’t have to. You can check in as regularly as you’d like (although we recommend reviewing your mutual funds annually, at least, to ensure that your investments remain aligned with your goals).
They offer built-in flexibility and convenience
Of course, as your needs and circumstances change, so can your mix of investments and allocations. Working with your Mutual Fund Investment Specialist, you can make adjustments on any business day, ensuring a strategy that always fits your life.
What is mutual fund success?
Mutual funds can be an effective way to reach your savings goals. And the bonus? You can begin right now, with low minimum-investment amounts. This ensures that you can invest in a way that fits your budget and your life. Not the other way around. All you have to do is make regular, automatic contributions, and watch your savings grow!
Now that you have a deeper understanding, think mutual funds are the right way forward for you?
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*In the province of Quebec, the authorized representatives are Financial Security Advisors who have been duly certified by the Autorité des marchés financiers. The information contained in this report was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete and it should not be considered personal taxation advice. We are not tax advisors and we recommend that clients seek independent advice from a professional tax advisor on tax related matters. Mutual funds are offered through Co-operators Financial Investment Services Inc. to Canadian residents except those in Quebec and the territories. Segregated funds and annuities are administered by Co-operators Life Insurance Company. Co-operators Life Insurance Company and Co-operators Financial Investment Services Inc. are committed to protecting the privacy, confidentiality, accuracy and security of the personal information that we collect, use, retain and disclose in the course of conducting our business. Visit www.cooperators.ca/en/Privacy for more information. Co-operators® is a registered trademark of The Co-operators Group Limited..