What is a Mutual Fund?

A mutual fund is a collection of investments – stocks, bonds or other securities – that’s managed by a professional portfolio manager.

When you invest in a mutual fund, you’re pooling your money with other investors. The portfolio manager has the entire pool of money to work with, and makes decisions based on each fund’s objective.

Types of Mutual Funds

Mutual funds come in many varieties to meet different investor goals. Most of Franklin Templeton’s mutual funds fall into one of four asset classes:

Equity Funds

Invest mainly in stocks from a selection of companies. This type of fund may focus on certain sectors (energy, for example) or have a specific investment style.

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Fixed Income Funds

Invest mainly in bonds or other debt securities. This type of fund offers investors the potential to earn income, while preserving their initial investment.

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Multi-Asset Funds

Invest in a number of asset classes, such as stocks, bonds and money markets. This type of fund offers broad diversification, often associated with pension-style investing.

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Alternative Funds

Invest in a variety of asset classes and strategies. This type of fund offers the potential to reduce volatility and improve portfolio returns.

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FOUR ADVANTAGES OF INVESTING IN MUTUAL FUNDS

Mutual funds offer four distinct advantages over hand-picking investments such as stocks or bonds.

1. Professional Management

Mutual funds give investors access to the expertise of full-time, professional money managers. Portfolio managers have the experience and resources to actively buy, sell and monitor investments.

2. Diversification

By investing in a mutual fund, you’re investing in an entire bundle of stocks, bonds or other securities – essentially guarding against the old adage about too many eggs and only one basket.

3. Affordability

For many people, it would be more costly to purchase directly all of the individual securities held by a single mutual fund. By contrast, the minimum initial investments for most mutual funds are more affordable.

4. Liquidity

Most mutual fund holdings can be sold any day the stock markets are open, so you always have easy access to your money. Of course, the value of your holdings may be worth more or less when you sell than when you buy.

HOW TO INVEST IN MUTUAL FUNDS

We recommend working with a qualified investment advisor. An advisor is the best person to help you set goals, make a plan and stay on track for a healthy financial future.

Your advisor will help:

  • assess your current financial situation
  • set personalised and realistic investment goals
  • recommend suitable products, solutions and services

A good advisor will also monitor the performance of your portfolio and suggest adjustments when it’s time for change.

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ADDITIONAL INFORMATION

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