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RSM230H1 (32)

CSC_Chapter 19 Mutual Funds Types and Features.pdf

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Rotman Commerce
Laurence Booth

Chapter 19: Mutual Funds: Types and Features December-13-11 12:12 AM Types of Mutual Funds ○ Cash and equivalent funds  Invests in near-cash securities or money market instruments (T-bills, bankers' acceptances, high-quality corporate paper and short-term bonds  Funds include: □ Canadian money market □ US money market,  Money market funds add liquidity to a portfolio and provide a moderate level of income and safety of principal  Risk is low, but subject to interest rate risk  Any income received is taxable as interest income ○ Fixed-income funds  Designed to provide a steady stream of income rather than capital appreciation with the safety of principal  Funds include: □ Canadian bond, Canadian income trust, high-yield bond, Canadian short-term bond and mortgage, foreign bond  Risks include interest rate risks, corporate bonds expose the fund to default risk ○ Balanced funds  Invest in both stocks and bonds to provide a mix of income and capital growth, and offers diversification ○ Equity funds  The most popular type of fund, has most classifications: □ Canadian and US equity, Canadian dividend, Canadian and US small and mid-cap equity, International equity, European equity, emerging markets equity, Asia/Pacific rim equity, Japanese equity  Main objective is long-term capital growth ○ Specialty and Sector Funds  Seeks capital gains and is willing to forgo broad market diversification for above-average returns □ Because of narrower focus,often carry substantial risk due to concentration of assets in just one a
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