MUTUAL FUNDS by 1szbxl


									              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

                       Mutual Funds                 1
  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 payout
     High dividend equities and bonds
• Money Market Funds
      safety
     Safe government bonds
• Other….               Mutual Funds     2
        NAVPS and Redemption
• NAVPS (net asset value per share)

• Each unit is valued at the end of the trading day
• Unit value = total assets – liabilities
                 number of units O/S
• 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)

                        Mutual Funds                    3
             PRO’s of MF
Professional management
Commission (+/-!?)
Record keeping

                  Mutual Funds   4
    CON’s of MF (disadvantages)
Professional Management
  – Management often focuses on the short term
  – < 50% beat the TSX S&P 60

                      Mutual Funds               5
                EXPESES / FEES
1. MER (management expense ratio)
  •   0.5 to 3+% of assets (not profits!)
  •   Overhead, legals, audits, salaries, trailers,
      advertising, communication
2. “Load”
  A. Front End: pay a commission when purchased
  B. Back End / declining load: pay a commission
     when the fund is redeemed
  C. No Load: no commission fee!

                          Mutual Funds                6

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