Comparing Products

Once you know which types of investment solutions are right for you, all that’s left to do is shop and compare different funds.

Four Things to Consider When Comparing Funds

• Investment goals
• Long term returns
• Management styles
• Management fees

Investment Goals

Different funds have different goals:

• Some income funds may aim to produce a regular, steady income with government securities, while others derive their revenue from the appreciation of corporate bonds.
• Equity funds may target revenue in the form of dividends or capital growth. Information on a fund’s investment goals is available in the prospectus and on the websites of mutual fund providers. Knowing about a fund’s investment goals is an essential prerequisite to making an investment.

Long Term Returns

This is the most common point of comparison. However, it’s important to remember that past performance is not always indicative of what will happen in the future. To evaluate how steady a fund’s returns are and its ability to produce good results, take a look at its returns over an extended period of time. Some newspapers or financial websites publish the quartile rankings of funds within the same category. Although this is a good way to compare a fund’s performance, it does not account for its level of risk.

When you evaluate a fund based on its results, always compare funds that invest in the same asset category, share similar goals, and are traded on the same financial market. For example, a fund that invests only in Canada should not be compared to a fund that favors international securities.

Management Styles

A fund’s management style determines how its securities are selected and guides its standard investment decisions. Some styles are more ideal for certain situations than others. For example, some market conditions are conducive to growth styles, while others tend to benefit value styles.

Choose funds with a variety of management styles in order to optimize the potential overall returns of your portfolio.

Management Fees

Management fees and other investment-related costs vary from one fund to the next and are usually between 1% and 3%. The prospectus usually contains all information on the expenses covered by the management fees paid by investors.