Back to Basics: Mutual Funds

A mutual fund is an investment fund made up of a collection of investments. This collection can be similar, all stocks or bonds for example, or a diverse mix depending on the fund’s makeup. A mutual fund can also mimic a specific index such as the S&P/TSX Composite or DowJones.

The collection of investments is owned by a group of investors and managed by a professional fund manager. When you purchase units in a mutual fund you join the group of investors. Mutual funds are open-ended, which means as more people invest in the fund it can issue new units.

All mutual funds have risk, and all have fees. Some of these fees could be paid when you purchase the fund, while some could be paid when you sell it. Always determine what type of fees, and how much these fees are before purchasing a mutual fund. You should also look at the risk level of a mutual fund to make sure it fits your risk tolerance (how much risk you are willing to take) and your financial goals.