Equity Funds

Equity funds or Equity Mutual Funds invest in stocks. There are Canadian Equity Funds, US Equity Funds, International Equity Funds, Sector Funds and even Index Funds that in essence are a type of equity fund.

The investment objectives of equity mutual funds, in most cases, is long term growth and capital gains.† Equity Funds contain more risk and are more volatile than fixed income type funds such as bond funds, mortgage funds and other similar type funds.† Certain types of equity funds focus on a particular country, countries or sectors.† Equity funds that involve the portfolio manager buying and selling stocks on a regular basis based on market conditions is known as an actively managed fund.† Funds that are designed to mimic a specific market index are known as passively managed funds.

Although there are associated costs in investing in mutual funds, including the acquisition and/or disposition of the fund, and the management expense ratios, there are obvious benefits to investing in this investment category.† Professional money managers decide which shares to buy, when to sell them and how to allocate the fundís money.†† Mutual fund managers are professionals and their expertise comes with a price.† In addition to the possible sales charges associated with buying and selling mutual funds and the MERs, some equity funds have minimum holding periods and early trading charges.†

Mutual funds in Canada are highly regulated, and performance data is easy to acquire. Mutual funds are issued by prospectus and it is important to note that returns are not guaranteed and principal is not guaranteed.† Unit values fluctuate in value and investors may pay commissions to buy and/or redeem and sell mutual funds.† Investors should always read the prospectus prior to making an investment into a mutual fund.

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