Mutual Fund Primer

Benefits of Mutual Funds

Risk versus Reward

Types of Funds

Core versus Specialty

10 Rules for Successful Investing

What is a Mutual Fund?

A mutual fund pools a group of investors' money in order to reach a size that is sufficient for effective diversification. Each mutual fund is managed by a professional money manager and has its own investment mandate. When individuals invest in a fund, they are actually purchasing a portion (or units) of the fund and are entitled to participate in any gains or losses realized. Mutual fund investors, known as unitholders, also pay a share of the fund's expenses.

Risks

Mutual funds are not guaranteed. Their value is influenced by a host of different factors, including interest rates, economic conditions, exchange rates, and company specific events. The unit value (or NAVPS) of a fund will fluctuate with changes in the fund's investments.

Benefits of Mutual Funds

Professional Management - Building an investment portfolio of individual stocks and bonds requires a great deal of time and expertise. Mutual funds offer professional money management at an affordable price. Each Altamira fund is assigned a lead manager, who is accountable for the overall strategic direction of the fund. The lead manager is supported by other portfolio managers and research analysts with complementary expertise.
Funds to Suit Every Investment Goal - Altamira has mutual funds to suit every investment objective - from the very conservative to the highly aggressive.
Convenience - Unlike stocks and bonds, investors don't need a lot of money to invest in mutual funds. In fact, you can get started for as little as $50 a month (minimum $25 per fund) with an Altamira Automatic Investment Plan (AIP).
Liquidity - One of the major benefits of mutual funds is that unitholders always have access to their money. Mutual fund units can be sold at any time at the price established at the close of each business day.
Diversification - By pooling the funds of thousands of individuals, mutual funds give small investors access to a diversified portfolio that's managed by investment professionals. Diversification is a risk-management technique that combines a variety of investments in order to reduce the impact that any one security has on the performance of a portfolio. A diversified mix of investments can lower overall risk without necessarily reducing returns.

Risk versus Reward To top

Investing involves a trade off between the potential rewards and the potential variability (risk) of certain types of investments. Normally, in order to achieve higher returns, an investor must be willing to accept higher short-term variability in the value of their investments. Higher risk investments are recommened for investors who have a long time horizon (i.e. 5 years or longer). If you have a shorter time horizon and are more concerned with capital preservation, lower risk investments are more suitable. They will provide greater stability, although returns are often lower.

Types of Funds To top

Type	Investments	Volatility
Money Market Funds	Government guaranteed T-Bills and other cash investments	Very Low
Canadian Income Funds	Government or Corporate Bonds	Low to Moderate
Global Income Funds	Bonds issued in foreign currencies by the Canadian government or international agencies	Moderate
Growth & Income Funds	Contain a mixture of growth or dividend paying stocks, bonds and cash depending on the objectives of the fund	Moderate
Canadian Growth Funds	Canadian stocks	High
Global Growth Funds	Foreign stocks	High
Specialty Growth Funds	Aggressive growth stocks that often concentrate on a specific sector	Very High

Core versus Specialty To top

Core funds are diversified across sector and industry type and concentrated primarily in mature capital markets. Core funds should be the foundation of an investor's mutual fund portfolio. Specialty funds restrict their investments to a particular sector, emerging economic area, or size of company and tend to be more volatile than core funds. Although the appropriate weighting of specialty funds depends on an investor's personal situation, Altamira typically recommends limiting specialty fund exposure to 30% of a portfolio, with no more than a 10% investment in any one specialty fund.