MUTUAL FUNDS• A pre-packaged portfolio of investment

securities, managed by a professional• MF pool (put together)the capital of investors• When you invest in a MF you are essentially

buying a small piece of every security in the fund’s portfolio

• The professional fund manager controls what the fund invests in

• When the value of the securities in the fund rises, so does the value of your units held

1Mutual Funds

The type of fund and its objectives determines the types of securities that

make up the fund• Growth Funds

capital growth equities

• Fixed Income Funds cash flow payoutHigh dividend equities and bonds

• Money Market Funds safetySafe government bonds

• Other….2Mutual Funds

NAVPS and Redemption

• NAVPS (net asset value per share)

• Each unit is valued at the end of the trading day• Unit value =

• Most funds are open ended no set maximum number of units

• “cashing in your units” is at the discretion of the holder (fund must buy back units)

3Mutual Funds

total assets – liabilities number of units O/S

PRO’s of MF

Professional managementDiversificationFlexibilityCommission (+/-!?)LiquidRecord keeping

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CON’s of MF (disadvantages)

Fees…. Professional Management– Management often focuses on the short term– < 50% beat the TSX S&P 60

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EXPESES / FEES

1. MER (management expense ratio)• 0.5 to 3+% of assets (not profits!)• Overhead, legals, audits, salaries, trailers,

advertising, communication2. “Load”

A. Front End: pay a commission when purchasedB. Back End / declining load: pay a commission

when the fund is redeemedC. No Load: no commission fee!

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