Mutual Funds 101
Things to consider before you invest!
November 18, 2020
There are many individuals who have similar risk and return objectives as it relates to investing. Mutual Funds are a medium to facilitate the management of money brought in by individuals who would like their funds managed in a similar fashion.
For simplification purposes, let’s say we have 5 individuals, all with $20,000 to invest and all of whom have a conservative risk profile. Assuming these 5 individuals invest their $20,000 into a Mutual Fund with a conservative mandate, the pool of investments now becomes $100,000. This $100,000 will be invested by the Fund Manager in a diversified portfolio of investment securities which will spread investment risk. This ‘diversification’ concept is more commonly known as ‘not placing all your eggs in one basket’.
The persons who have invested in the Mutual Fund will now be called Unit Holders and will partake in the performance of the entire portfolio.
For simplification purposes, let’s say we have 5 individuals, all with $20,000 to invest and all of whom have a conservative risk profile. Assuming these 5 individuals invest their $20,000 into a Mutual Fund with a conservative mandate, the pool of investments now becomes $100,000. This $100,000 will be invested by the Fund Manager in a diversified portfolio of investment securities which will spread investment risk. This ‘diversification’ concept is more commonly known as ‘not placing all your eggs in one basket’.
The persons who have invested in the Mutual Fund will now be called Unit Holders and will partake in the performance of the entire portfolio.