Stringent Regulations Protect Investors

Stringent rules and regulations detail how mutual funds must be set up and managed, and how investors are to be informed about their investments.

Specifically, mutual fund companies must:

• Publicize procedures for the purchase and redemption of fund units
• Calculate and disclose the unit price of a fund on a regular basis
• Disclose investments in a fund on a regular basis
• Seek the approval of unitholders to change any major aspect of a fund, such as its investment objective
• Receive approval from securities authorities before making any significant changes to a fund

Additionally, the securities in a fund must be held by a third party, the custodian, which is usually a bank or trust company. This means the money or investments in mutual funds are not physically held by the fund company.

You own your portion of the mutual fund. So if the manager of a mutual fund ever gets into financial difficulty, your money is still protected because the fund managers don't own the fund or its individual securities - you and the other investors do.

How to determine which creatures in the jungle are friendly

You should evaluate a mutual fund on the basis of several criteria before buying:

• The fund's objective, its returns and risk level
• The manager's investment style and performance
• The options offered by the mutual fund company

You can get information from financial advisors, mutual fund companies, financial magazines and books, websites, and the mutual fund section of newspapers.

You should also carefully read the prospectus you receive when you buy a mutual fund. Look for specific information about the risks and costs associated with a fund.

Invest your time before choosing who will manage your mutual fund investments. By doing so, you can control part of the risk and gain an opportunity to achieve higher rewards.

It's Still A Jungle, So Get A Good Guide

Even though you now know more about the jungle, it's still important to get a financial advisor as your guide who can lead you, for three reasons:

• No matter how much you learn about investing and mutual funds, unless you do it for a living you won't be able to keep up with the ever-changing details.
• You need an objective opinion. You've heard it before elsewhere - doctors don't operate on family members, lawyers don't represent themselves. Why? They're too close to the patient or client and can't stay clear-headed.
• Your jungle guide will give you a better grasp of concepts, relationships, and options. With valuable experience leading others through the jungle, your guide can point out shortcuts and pitfalls and suggest sensible tradeoffs that can help you pursue your dreams.

Your Partners in Planning investment funds advisor is your guide through the jungle. Call him or her whenever you want helpful insights, and make sure you and your financial planner hold regular meetings to review your portfolio.

Do you require an expert to help you achieve your financial goals or a second opinion to evaluate your mutual fund portfolio? 

Complete our on-line form to receive a free information package or contact Horizon Planning Group any time at 1.877.683.9322. If you prefer you may always send us your questions via email to investments@bestplans.ca and we'll reply back with expert advice within 24 hours.