Mutual funds: diversify your portfolio and effectively manage risk

Mutual funds are one of the most popular investment products in Canada - they are versatile, accessible and easy-to-use. They compliment most investment strategies, providing you with the benefits of diversification which helps manage risk over the long-term.

How mutual funds work:

Mutual funds are a pool of securities, owned by multiple investors. Each mutual fund has a specific investment objective which guides the buy/sell decisions of the fund manager. When you invest in a mutual fund, you purchase a portion of an investment portfolio sold as "units." Units are usually liquid and can be sold at any time.

Mutual funds typically have one of three commission fee structures: front-end load, back-end load or no-load. Front-end mutual funds charge a commission fee at the time of purchase while back-end funds charge a commission fee at the time of sales. No-load funds do not charge a fee at the time of purchase or sale. Management fees and other expenses may be applied. It is important to research the fees and select the one that best aligns with your investment strategy.

Benefits of mutual fund investing:

• Risk management - when you purchase a mutual fund, you diversify your portfolio by owning multiple securities. This can reduce the amount of risk associated with owning individual securities, especially during market downturns.
• Expertise – many mutual funds are run by a team of portfolio managers with a specific area of investment expertise who are skilled at researching, buying and selling multiple securities at a time.
• Tax-free switching between other SelectClass Portfolios and classes of BMO Global Tax Advantage Fund Inc.
• Accessible – enjoy the benefits of professional portfolio management, including continuous portfolio monitoring, available to individual investors at low investment minimums. This is an easy and effective way to build your portfolio.
• Liquidity - most mutual funds can easily be redeemed. Typically, the issuing investment company will repurchase the units you own on any business day as opposed to selling some individual securities where a purchaser and an agreed price need to be determined before the investment can be sold.
• Variety of choice – there are thousands of mutual funds in Canada, covering a wide range of investment objectives from 100% fixed income to 100% aggressive equity funds. Balanced funds provide a mix of both fixed income and equity securities, further diversifying your portfolio.

BMO InvestorLine offers a universe of over 9,000 mutual funds, covering a variety of asset classes, geographical locations and investment styles. To learn more about the types of funds available, please visit our Mutual Fund Centre.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.