What is a mutual fund?
A mutual fund is an investment vehicle that pools money belonging to many people to invest in a variety stocks, bonds or other securities. Mutual funds are managed by professionals who make the investment decisions for the fund with the goal of increasing the overall fund value. As the assets in the fund rise in value, your share of the fund (typically measured in “units”) will also increase in value. If the value of the fund’s assets decreases, so will the value of your units. Each fund has a written investment goal that helps you decide whether it should have a place in your overall financial plan.
A mutual fund typically focuses on specific types of investments. For example, a fund may invest mainly in government bonds, stocks from large companies or stocks from certain countries. Some funds may invest in a mix of stocks and bonds, or other mutual funds.
You can own mutual funds in registered accounts like RRSPs, RRIFs, RESPs, TFSAs and some pension plans. Depending on your individual circumstances, you can also own corporate class mutual funds, which offer certain tax advantages for non-registered accounts, which are not tax-sheltered like registered accounts. Mutual funds may be generally more suitable for longer-term investors, as the value of securities held by the fund can fluctuate over time and returns are not guaranteed.
Types of mutual funds:
- Equity funds invest in shares of companies and offer potential capital appreciation over time.
- Equity funds have a variety of management styles.
- Fixed-income funds invest in bonds and have the potential for growth while providing a source of income.
Asset allocation and balanced funds
- Asset allocation and balanced funds are a mix of equities, bonds and cash equivalents.
Diversified income funds
- Diversified income funds aim to generate income by investing across various asset classes, sectors and parts of the world.
- Like most income funds, they make income generation a priority over capital appreciation.
Corporate class funds
- Corporate class funds may be suitable if you are looking for a tax-efficient vehicle for your non-registered assets.
Find out about mutual funds offered by Sun Life Global Investments.
Invest in mutual funds
Step 1: Find an advisor
An advisor’s job is to help you understand how different products – each with its own features and options – can best meet your individual needs. Talk to your advisor; if you don't have an advisor, find one you're comfortable working with. There’s no cost to talk to an advisor.
- Find the right person. Ask people you trust for recommendations.
- Ask lots of hard questions – don’t be shy.
- If you’re not comfortable talking about your finances with someone, look for someone else.
Step 2: Meet with your advisor
To get the most out of the meeting with your advisor, take some time beforehand to think carefully about what you want to achieve. To help your advisor recommend the right products for your needs, it will be helpful if you gather some basic information about your income, assets and liabilities – including your savings, investment and pension plan statements.
Step 3: Make your investment
Your advisor will help you with any paperwork that’s required and ensure your money is transferred. Shortly after making your investment, you will receive a statement confirming the details of your account. Your portfolio may be reviewed regularly to confirm your strategy and assess progress toward your goals.
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