Page 187 - A Canuck's Guide to Financial Literacy 2020

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▪ Money Market Mutual Funds

Money market mutual funds allow Canadians to earn a higher rate of interest from
their cash balances. These are low risk investments that allow you to earn interest
and access your money fairly quickly, typically a one-day settlement. These money
market funds invest in short-term high-quality debt instruments such as treasury bills
with the primary goal to preserve your capital.

▪ Fixed Income Mutual Funds

Fixed income mutual funds invest in short term and long-term debt securities such
as government bonds, treasury bills, corporate bonds etc. This type of funds aim to
preserve your capital while provide you with a regular monthly distributions. In
addition, fixed income funds are sensitive to interest rates and may differ by
geographic location, credit quality, term to maturity, investment strategies and so on.

▪ Equity Mutual Funds

Equity mutual funds invest in a basket of stocks. These funds may differ by the type
of companies that they purchase. Equity fund categories could include small, mid
and large cap funds. Cap refers to the capitalization and size of the companies in the
basket of stock purchases. These funds may pay a monthly dividend distribution.

▪ Balanced Mutual Funds

Balanced mutual funds have an equal combination of stocks and fixed income.
Typically, these funds have 50% of the assets in bonds and the other 50% in stocks,
however, this can deviate depending on the portfolio mandate. The goal of these
mutual funds is to preserve your capital while giving you the opportunity for growth.

▪ Alternative Mutual Funds

Alternative mutual funds have more freedom to take on risk. These funds typically,
hedge funds, are allowed to invest in physical commodities, take position in
derivatives such as options and engage in short selling. These types of strategies
are typically not permitted in regular mutual funds.
▪ Funds of Funds

Funds of funds are mutual funds that invest in other mutual funds. These types of
funds are typically very diversified often holding over 10 different mutual funds in
their portfolio. These types of funds are also known as multi-manager investments.

Advantages of Mutual Funds

▪ Convenience
▪ Affordability
▪ Access to your money