1. Types of Mutual Funds

2. There are Five Main Classes of Mutual Funds: money market funds income funds Equity funds balanced funds index funds

3. Equity Funds Also known as stock funds or growth funds All or virtually all investments are in stocks Riskiest of all mutual funds, but also tend to offer highest returns over the long term Primary goal for most equity funds is growth (capital gains); secondary goal is dividend income There are many different kinds of equity funds

4. Equity Funds Some differ by type of company invested in o Blue chip equity funds invest in very large, well-known companies o Small cap (capitalization or total dollar value of all shares) equity funds invest in companies under a certain size Some differ by investing style o Aggressive growth fund managers try to get “big wins” but these funds are riskier than average o Value fund managers try to find stocks that are undervalued or “overlooked” by most other investors

5. Equity Funds Some differ by geography o You can buy Canadian, U.S., Japanese, European, Asian, Latin American and North American equity funds that invest in only those regions o Emerging market funds invest in those countries, such as China and India, with growing, modernizing economies o Generally international funds invest in countries outside North America o Global funds can invest in countries anywhere in the world, including Canada

6. Equity Funds Some differ by industry o Most equity funds are well diversified, but sector funds invest in a particular industry such as health care, technology, entertainment, resources, etc. Some differ by return sought o Most equity funds have growth as their main objective, but dividend funds seek companies that pay large, regular dividends. Their investors are looking for income over capital gains and dividend income is taxed at a lower rate than investment income.

7. Equity Funds The most specific the fund, the less diversification and the greater the risk Funds that invest in specific areas should only be owned in small quantities by most investors

8. Money Market Funds Also known as safety or security funds Include short-term investments such as T-bills and similar investments Primary goal is to preserve your investment Very little risk, low returns, very liquid

9. Money Market Funds Can be used as a short-term investment, an emergency fund or as a secure part of a well diversified portfolio Some investors use money market funds as a “parking spot” for their money during fluctuating market conditions or when trying to decide where to invest

10. Income Funds Most common type is Canadian bond funds Other funds in this category are mortgage funds, international bond funds and income funds Canadian bond funds invest in government of Canada bonds and bonds issued by well-known Canadian corporations

11. Income Funds Mortgage funds actually buy and sell mortgages that have been issued by banks International bond funds invest in bonds from Canada, the U.S. and the rest of the world Income funds invest in bonds as well as other income producing investments such as mortgages and preferred shares All income funds attempt to provide the investor with a high level of income (mostly interest) and some opportunity for capital gains

12. Income Funds That income can be paid out to the investor or, more commonly, reinvested to buy more units of the fund Riskier than money market funds, but less risky than equity funds Often used as part of a well diversified portfolio

13. Balanced Funds Hold a mixture of money market, bond and stock investments The fund manager allocates investments among the various asset classes Objective is to give you a balance among safety, income and capital appreciation (capital gains) Balanced funds try to be “one size fits all”

14. Balanced Funds New balanced funds are being created for more specific situations The asset allocation is generally left up to the fund manager Usually some investment has be made in all asset classes, but the manager can invest more in the asset class he/she thinks will do best in the near future

15. Index Funds One of the newest trends in mutual funds The objective of these funds is to try to match some financial market index such as the Dow Jones or S&P500 Most of these funds are equity funds, but there are bond index funds too