How Do I Purchase How Do I Purchase Mutual Funds?Mutual Funds?

Investment and Finance 12Investment and Finance 12

Ms. StewartMs. Stewart

Where do I buy mutual Where do I buy mutual funds?funds?

You can buy mutual funds only from You can buy mutual funds only from advisers who are licensed to sell advisers who are licensed to sell them. When someone is registered, it them. When someone is registered, it means they have taken the training means they have taken the training and passed the exams their province and passed the exams their province requires to sell mutual funds. Also, requires to sell mutual funds. Also, they must work for companies that they must work for companies that are are licensedlicensed to sell funds. to sell funds.

Where can I buy mutual Where can I buy mutual funds?funds?

Banks and trust companiesBanks and trust companies Life Insurance companiesLife Insurance companies Credit UnionsCredit Unions Mutual Fund dealersMutual Fund dealers Brokerage firmsBrokerage firms Mutual fund companies that sell Mutual fund companies that sell

directly to the publicdirectly to the public

How do I choose mutual funds How do I choose mutual funds that are right for me?that are right for me?

1)1) Buy only from registered advisors.Buy only from registered advisors.2)2) Ask about fees:Ask about fees: There are fees involved There are fees involved

with all mutual funds. Some have more with all mutual funds. Some have more fees than others.fees than others.

3)3) Make sure your investments fit your Make sure your investments fit your financial plan: financial plan: You can lose money on You can lose money on mutual funds just as you can with any mutual funds just as you can with any other investment. your goals, how much other investment. your goals, how much risk you want to take, and the length of risk you want to take, and the length of time you plan to invest.time you plan to invest.

How do I choose mutual funds How do I choose mutual funds that are right for me?that are right for me?

4)4) Research the risks: Research the risks: Make sure you know Make sure you know the risks when you buy a fund. Don’t the risks when you buy a fund. Don’t assume that a fund that did well in the assume that a fund that did well in the past, will do well in the future. Some past, will do well in the future. Some mutual funds are much riskier than others.mutual funds are much riskier than others.

5)5) AvoidAvoid hot tips: hot tips: Any fund that may grow Any fund that may grow a lot in value, can also drop a lot in value. a lot in value, can also drop a lot in value. The risks could be quite high. Be very The risks could be quite high. Be very careful about picking a fund that someone careful about picking a fund that someone says will make you a lot of money quickly.says will make you a lot of money quickly.

How do I choose mutual funds How do I choose mutual funds that are right for me?that are right for me?

6)6) Look past the advertising: Look past the advertising: You may You may see ads for a mutual fund company, see ads for a mutual fund company, and get to know their name really well. and get to know their name really well. When you want to buy a mutual fund, When you want to buy a mutual fund, you may decide to buy their funds you may decide to buy their funds without thinking much about it, just without thinking much about it, just because you know the name. However, because you know the name. However, some of their funds can be doing quite some of their funds can be doing quite poorly, while others are doing very poorly, while others are doing very well. well.

Steps to Buying a Mutual Steps to Buying a Mutual FundFund

Before you buy any mutual funds you Before you buy any mutual funds you must set up an investment account. must set up an investment account. You can do this at most financial You can do this at most financial institutions (bank) or investment institutions (bank) or investment company.company.

*Note* In most provinces you must be *Note* In most provinces you must be 18 to do this, those 18 and under can 18 to do this, those 18 and under can have their parents set up an account have their parents set up an account “in trust” until the age of 18 is reached “in trust” until the age of 18 is reached and it can then be transferred.and it can then be transferred.

Steps to Buying a Mutual Steps to Buying a Mutual FundFund

Research the following questions:Research the following questions: How well is this fund doing in How well is this fund doing in

comparison with other similar funds?comparison with other similar funds? What looks good about the future of What looks good about the future of

this fund?this fund? What is the current unit price?What is the current unit price? What do experts think about owning What do experts think about owning

this mutual fund?this mutual fund?

Steps to Buying a Mutual Steps to Buying a Mutual FundFund

How much risk is there with losing How much risk is there with losing some of my money?some of my money?

What fees will I pay?What fees will I pay? How will my advisor be paid for How will my advisor be paid for

selling me this fund?selling me this fund?

Purchasing and Cancelling Purchasing and Cancelling

When you purchase a mutual fund you buy When you purchase a mutual fund you buy units of the fund. units of the fund. Each fund requires that Each fund requires that you buy a minimum amount (for example, you buy a minimum amount (for example, $500). The number varies from fund to $500). The number varies from fund to fund. fund.

You can cancel your order to buy a mutual You can cancel your order to buy a mutual fund within 48fund within 48 hours after you receive hours after you receive confirmation of your order. Rules vary in confirmation of your order. Rules vary in some provinces. some provinces.

How do I sell my Mutual How do I sell my Mutual Funds?Funds?

The value of a mutual fund unit is described as The value of a mutual fund unit is described as the the net asset value per sharenet asset value per share (NAVPS). Here (NAVPS). Here is how you calculate the NAVPS:is how you calculate the NAVPS:

First, take the total value of the fund if First, take the total value of the fund if everything were sold on that day. everything were sold on that day.

Divide that total value by the total number of Divide that total value by the total number of units that the fund has sold to investors.units that the fund has sold to investors.

Example:Example: If a fund is worth $10 million and has If a fund is worth $10 million and has sold one million units, the NAVPS will be $10. If sold one million units, the NAVPS will be $10. If you own 10 units, your investment is worth you own 10 units, your investment is worth $100. $100.

Costs Associated with Selling Costs Associated with Selling Your FundYour Fund

If you bought a mutual fund with a deferred If you bought a mutual fund with a deferred sales charge, you will pay some fees upon sales charge, you will pay some fees upon selling your mutual fund.selling your mutual fund.

A A deferred sales chargedeferred sales charge (or a “back-end (or a “back-end load”) is a sales fee that you will pay when you load”) is a sales fee that you will pay when you sell your investment. The fee often goes to zero sell your investment. The fee often goes to zero after keeping the investment for a few years.after keeping the investment for a few years.

The size of the fee depends in part on how long The size of the fee depends in part on how long you have held the funds, and what company you have held the funds, and what company you are dealing with. Most companies allow you you are dealing with. Most companies allow you to sell a certain number of units (say, 10%) for to sell a certain number of units (say, 10%) for free each year.   free each year.