Mutual Funds

Talking with our Financial Planners can help you figure out whether mutual funds make sense for your financial plan.

Make an appointment today to discuss your financial plan! Call us at 1-877-WESTOBA or email infowcul@westoba.com.

What are they?

What are they?

A mutual fund is an investment vehicle made up of a collection of stocks and/or bonds. Funds can vary in the amount of returns generated and degree of risk.

All mutual funds are a variety of these three classes:

  • Money Market – These are very liquid and are the lowest risk as they invest in short-term government bonds, treasury bills and other money market investment vehicles.
  • Fixed Income (mortgages, bonds, preferred shares) – Bonds are riskier but likely to have a higher pay out compared to money market.
  • Equity (stocks) – These represent the largest category and invest in corporate shares that bear more risk compared to both bond and money market funds.

Earn Money

How can you earn money?

Generating income from a mutual fund happens in three ways:

  1. Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all of the income it receives over the year to fund owners in the form of a distribution.
  2. If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass along these gains to investors as a distribution.
  3. If the fund holdings increase in price but are not sold by the fund manager, the fund’s units increase in price. You can then sell your mutual fund for a profit.

Mutual funds generally give you a choice between receiving a cheque for distributions or reinvesting your earnings into more mutual fund units.

Advantages

What are the advantages?

Some advantages when it comes to mutual funds are:

  • Professional Investment Management – Portfolio managers will do the research for you and carefully supervise, buy and sell stocks that are right for you.
  • Diversification – By owning shares in a mutual fund, you’ll hold many securities therefore your risk is significantly decreased.
  • Liquidity – Ability to get in and out with ease.
  • Lower Costs– Economies of scale make mutual funds cost-effective. Buying and selling large amounts of securities at a time will make transactions on a larger scale and cost less.
  • Simplicity – Working with a Financial Planner will streamline the process and can make suggestions to make investing with mutual funds work for you.