Mutual Funds — A Smart Choice for Many Investors
Mutual funds are a popular form of investing in Canada. That’s because they offer convenience, flexibility and diversification, and are appropriate for a broad range of investors.
What is a Mutual Fund?
A mutual fund is an investment product in which your money is pooled with that of other investors to provide a wider range of investment options. A professional fund manager invests the money in a variety of holdings, depending on the goals and requirements of the fund, and manages the investments on an ongoing basis.
When you invest through a mutual fund, you are purchasing a unit in the entire pool of money that makes up the fund. That means you indirectly own an interest of the many companies, or other assets, that the mutual fund holds.
Investing in a mutual fund is easy — you simply decide how much you wish to invest and the fund that you wish to invest in, and with that amount, you purchase a certain number of fund units.
Why Mutual Funds are a Smart Investment Option
Because of their structure, mutual funds offer many benefits over investing your money individually. By pooling your money with other investors, you are able to diversify your investments. This means that you are able to purchase a wider variety of investment types than you might normally do on your own.
Diversification helps to minimize risk, because if one company or category within the fund performs poorly, it accounts for only a relatively small proportion of the entire portfolio held by that fund. As well, the initial investment required to get started is often lower with mutual funds than purchasing individual stocks.
You also benefit from the expertise that a professional fund manager brings to your investments — often at a lower cost than hiring a personal investment advisor directly.
Like all investments, mutual funds do carry risk. However, they may also carry a greater potential for reward than individual fixed-income investments such as Guaranteed Investment Certificates (GICs). The amount of risk and potential reward depends on the objectives and investments of the fund. Be sure to discuss this with an RBC Investment Advisor to ensure that a fund is a good match for your own risk tolerance and investment goals.)
Types of Mutual Funds
You can buy funds at many financial institutions, including RBC.
There are many different types of mutual funds available. The key difference is the type of investment they make. RBC offers a range of mutual funds in the following categories:
- Money market funds. These funds offer the greatest stability by choosing short-term investments that are considered high-quality and low-risk, such as treasury bills (T-bills). They are suitable for short-term goals when you require quick access to your money.
- Fixed income funds. These funds preserve capital and provide regular cash flow by investing in a range of fixed-income products such as treasury bills (T-bills) and bonds.
- Balanced funds. These funds hold a mix of fixed-income, equity and money market investments to provide a balance of security, growth and income.
- Equity funds (including Canadian, North American, U.S. and Global funds). These funds hold common shares of public corporations that focus on growth of capital through investments in the specified geographical region.
Within each category, a fund may further specialize according to a geographical area, an industry sector, company size, or ethical requirements.
RBC Select Portfolios
Another option is to choose an RBC Select Portfolio. This is an easy way to obtain a well-balanced portfolio that meets your investment objectives.
Each RBC Select Portfolio is constructed using RBC Funds® to meet investment needs in one of four categories: Conservative, Balanced, Growth or Aggressive Growth. The portfolio is professionally managed and the holdings are continually rebalanced to meet the goals of the Portfolio.
Start Investing Today
Mutual funds can be a good choice for first-time investors. They are also a good choice for investors who don’t wish to spend a lot of time researching and managing their investments, or as a complement to other forms of investing.
Mutual funds also provide one of the most flexible ways to invest your money. You can hold RBC Funds directly, as part of your short- or long-terms savings plan, or within a Registered Retirement Savings Plan (RRSP).
Getting started with investing through mutual funds is as easy as visiting an RBC branch and speaking with an investment adviser.
Each RBC Fund has a minimum investment amount ranging from $500 to $10,000. The minimum amount required to invest in an RBC Select Portfolio is $5,000.
Once you have opened an account in an RBC Fund or an RBC Select Portfolio, you may also wish to set up an automatic investment plan. A pre-arranged amount is transferred automatically from your bank account weekly, bi-weekly, semi-monthly, monthly or quarterly, and deposited into your RBC Fund or RBC Select Portfolio. You can invest as little as $25 each time.
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