Risks

All funds carry some degree of risk.  Since the securities held within a fund fluctuate in value, unitholders may lose some or all of their original investment (although the chances are remote). It's important to learn about a fund's investment mandate and potential risks before you invest. This information can be found in the fund's prospectus.

Types of Investment Risk

• Company Risk: (also known as unsystematic risk) company-specific events, such as a poor earnings report, management change, legal action or potential bankruptcy can influence stock prices.  Company risk is a concern for equity and corporate/high yield bond fund investors.
• Country Risk:  political, economic and other financial events in a specific country can influence the value of foreign securities.  Country risk is a potential concern for international bond and equity fund investors. 
• Credit Risk:  the possibility that companies or other issuers held in a fund will default (fail to pay) on either the principal or interest payments owing to bondholders in a timely manner.  Higher quality bonds, including government bonds (e.g. US Treasury Notes and Government of Canada bonds) face the lowest credit risk.  By contrast, bonds that are issued by companies with poor credit ratings are subject to higher credit risk.  Credit risk is a potential concern for bond fund investors. 
• Currency Risk: refers to the possibility that the domestic currency will appreciate relative to the foreign currency in which securities are denominated. Under these circumstances a loss will be incurred on the exchange back into the domestic currency. Currency risk is a potential concern for international equity and international bond fund investors.
• Inflation Risk:  the risk that inflation will outpace investment returns over time and erode the purchasing power of an asset. Inflation risk is a potential concern for money market fund investors.
• Interest Rate Risk:  the risk that the value of a fixed income security will fluctuate as interest rates change. The value of a bond tends to move in the opposite direction of interest rates.  For instance, when interest rates rise the value of a bond will usually fall because it's stated coupon rate is lower than the going market rate.  Interest rate risk is a more immediate concern for bond fund investors.
• Liquidity Risk: the risk that arises when a security cannot be sold easily.  Liquidity risk comes into play if an investment has to be sold quickly, but an insufficient secondary market prevents the liquidation of shares, or limits the price at which the security can be sold.  Liquidity risk is a potential concern for both bond and equity investors. 
• Market Risk: (also known as systematic risk) the risk that applies to an entire asset class, with economic changes (e.g. recession) and other large events that can affect the value of major segments of the financial markets.