What Is a Mutual Fund?
A mutual fund is simply a pool of savings contributed by many investors and invested on their behalf by a portfolio manager.
The money contributed by you and by other investors in a mutual fund is invested in a portfolio of stocks, bonds or other securities, depending on the mutual fund's investment objective. In return, you receive units representing your holdings in the mutual fund. The value of your investment in a mutual fund will go up or down depending on the performance of the stocks, bonds or other securities in the mutual fund.
Investing Your Money And The Importance Of Diversification.
One of the most important things people should consider when investing their money is how much risk they are willing to take. The value of an investment will usually go up and down over time and depending on the type of investment, these increases and decreases can be quite large. Putting all of your money in one investment means increased risk because the value of your entire investment goes up and down.
Diversification simply means investing your money in several different investments. This helps reduce risk, because while the value of some investments may go down, others may go up and help offset the decrease. Mutual funds offer people a simple way to diversify their investments. First, a mutual fund itself is diversified because it owns several different types of investments. Second, investors can buy many different funds themselves and diversify even further. (Source: The Investment Fund Institute of Canada).
* Mutual funds are offered through Credential Asset Management Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual fund securities and cash balances are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions. Mutual fund values change frequently and past performance may not be repeated.
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