TAILIEUCHUNG - Mutual Funds: What You Need To Know

It’s important to understand why some funds target operating in the green zone, and why other funds may intentionally operate in the yellow or red zones. The green zone calculus is simple: when a fund maintains fixed expenses that are lower than its fixed revenues, it operates with a margin of safety. In a green zone fund, both the fund and its investors have a reasonable cushion to ride out difficult periods of low or no performance, and the fund operates with less business risk. In other cases, a manager may wish to operate in the yellow or even red. | n recent years more and more Canadians have invested in mutual funds. Because mutual funds are popular and widely available many people believe they are simple and low-risk investments. While mutual funds are a sound investment option for many people investors should keep in mind that not everything about mutual funds is simple and not all mutual funds are low-risk investments. In this brochure you ll find some basic information about mutual funds that will help you decide whether mutual funds are right for you. What is a mutual fund Mutual Funds A mutual fund is a pool of money that is managed on behalf of investors by a professional money manager. The manager uses the money to buy stocks bonds or other securities according to specific investment objectives that have been established for the fund. In return for putting money into the fund you ll receive either units or shares that represent your proportionate share of the pool of fund assets. In return for administering the fund and managing its investment portfolio the fund manager charges fees based on the value of the fund s assets. Mutual funds are open-ended investment funds meaning that new investors can contribute money to the fund at any time and existing investors can return their units or shares to the fund for redemption at any time. When you redeem your units or shares of a mutual fund you will receive a cheque based on the current market value of the fund s portfolio. Several parties are involved in the organization and operation of a mutual fund including Mutual Fund Manager Establishes one or more mutual funds markets them and oversees their general administration. Portfolio Adviser The professional money manager appointed by the Mutual Fund Manager to direct the 2 fund s investments. The Mutual Fund Manager also often acts as the Portfolio Adviser. Principal Distributor Coordinates the sale of the fund to investors either directly or through a network of registered dealers. Custodian The bank or .

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