Practical Money Skills - For Consumers

A mutual fund is an investment product -- made up of several investors' contributions -- that a professional fund manager invests in a variety of securities. This pool of wealth might be invested in a specific market or geographic sector, in blue-chip companies or in small company stocks. There are also "green" funds that only invest in environmentally friendly companies. The manager monitors the investments on an on-going basis.

Because mutual funds are overseen by a manager, investing in them frees up individual investors from having to continually research and manage their own investments. Mutual funds are also appealing because they:

Offer access to a wide range of investments

Are widely available (most financial institutions have a broad assortment on offer)

Are easy to buy (you can buy mutual funds through regular account withdrawals at most financial institutions)

Give you the opportunity to have "instant diversification"

Fees
All mutual funds charge the Management Expense Ratio (MER), which is the annual cost of managing and operating the fund. But there are other fees, too. It's important to inquire about them. They include:

Acquisition or disposal fees ("no load" mutual funds are those that don't charge this fee)

Initial fee (this "front-end load" is charged when you buy a mutual fund)

Selling fee (this "back-end load" is charged when you sell a mutual fund)