Escolar Documentos
Profissional Documentos
Cultura Documentos
Canadian Securities Administrators Securities regulators from each province and territory have teamed up to form the Canadian Securities Administrators, or CSA for short. The CSA is primarily responsible for developing a harmonized approach to securities regulation across the country. www.securities-administrators.ca
www.csa-acvm.ca
Thinking about investing in mutual funds? They can be an effective way to save for important goals like retirement or your childs education. But like all investments, they have their risks. There are also costs involved in owning mutual funds. The Canadian Securities Administrators (CSA) have put together this guide to help you learn more. Our members include the 13 securities regulators of Canadas provinces and territories. If you have questions or want more information, contact your local securities regulator listed on page 12.
Contents What is a mutual fund? What do mutual funds invest in? How can you make money? What are the risks? How is your investment protected? What are the costs? What if you change your mind? What about other types of investment funds? Questions to ask before you buy Know where to go for help 2 3 4 5 6 7 9 9 10 11
The importance of diversification Mutual funds can make it easy and affordable to own a variety of investments. Not all investments perform well at the same time. Different investments react differently to world events, factors in the economy like interest rates, and business prospects. So when one investment is down, another might be up. Having a variety of investments can help offset the impact poor performers may have, while taking advantage of the earning potential of the rest. This is called diversification. Whats a benchmark? Typically, a benchmark is a market or sector index against which the performance of the mutual fund can be measured. For example, if a fund invests mainly in Canadian stocks, the benchmark might be the S&P/TSX Composite Index, which tracks companies trading on the Toronto Stock Exchange. By comparing a fund to an appropriate benchmark, you can see how the investments held by the fund performed compared to the market or sector in general.
Index
Fund of funds
financial newspapers and on websites like www.globefund.com or www.morningstar.ca. How mutual funds are taxed In general, youll have to pay tax on the money you make on a fund. Interest, dividends and capital gains are all treated differently for tax purposes and that will affect your return from an investment. Keep in mind that distributions are taxable in the year you receive them, whether you get them in cash or they are reinvested for you. However, if you hold your mutual funds in a registered plan, you wont pay income tax on the money you make as long as that money stays in the plan. When you withdraw money from the plan, it will be taxed as income. Registered plans include: Registered Education Savings Plan (RESP) Registered Retirement Income Fund (RRIF) Registered Retirement Savings Plan (RRSP) You may want to talk to a qualified tax expert about any taxes you may have to pay on your investment in mutual funds.
How the fund could lose money The value of a foreign investment declines because of political changes or instability in the country where the investment was issued. If a bond issuer cant repay a bond, it may end up being a worthless investment. If the other currency declines against the Canadian dollar, the investment will lose value.
Fixed income securities Investments denominated in a currency other than the Canadian dollar Fixed income securities All types All types
The value of fixed income securities generally falls when interest rates rise. The fund cant sell an investment thats declining in value because there are no buyers. The value of its investments decline because of unavoidable risks that affect the entire market.
Whats a simplified prospectus? A simplified prospectus is a document that firms are required to send to investors after they buy a fund. You can also ask for a copy of the simplified prospectus before you invest. It includes information about a funds: investment objectives and strategies risks suitability for certain investors distributions sales charges, management fees and operating expenses income tax considerations Trailing commission In general, the management company pays a portion of its management fee to the firm you dealt with as a trailing commission (or trailer fee). This commission is for the services and advice the firm provides to you. Its usually based on the value of your investment and is paid for as long as you own the fund. Firms may pay a portion of the trailing commission to their advisers.
7
Fee calculator Want to find out how sales charges and fees could affect your investment? Check out the Tools and Calculators section at www.investorED.ca. Look into other series offered by the fund Most funds are offered in different series or classes, usually for different types of investors. The fees and expenses will be different for each series. Ask about other series that may be suitable for you.
10
If you have lost money Mutual funds come with risk. Therefore, you can lose money if the funds investments perform poorly. However, if you want money back because you think you have not been treated fairly, you may want to contact the Ombudsman for Banking Services and Investments (OBSI). OBSI is a free, independent service for resolving banking services and investment disputes. If youre not satisfied with the firms decision on your complaint, you can bring your case to OBSI for an impartial and informal review. You have up to 180 days after receiving the firms response to get in touch with OBSI. OBSI can recommend compensation of up to $350,000. For more information, see www.obsi.ca. You may also want to consult a lawyer to get advice on your rights and options. Your provincial law society can help you find a lawyer. Go to www.flsc.ca for a list of provincial law societies.
11
Investing basics: Getting started Your investment planning worksheet Investments at a glance Working with a financial adviser Take notes! notepad Protect your money: Avoiding frauds and scams
12