Mutual Funds

A mutual fund provides investors with access to professionally managed, diversified portfolio of investments for a relatively low price. Each mutual fund is essentially a basket of many different types of investments, including stocks, bonds, T-Bills and other securities. Because money is pooled, investors can gain access to more investment opportunities than they would have on their own. 

Generally speaking, most mutual funds are designed for those looking for longer-term growth potential. Mutual fund values can fluctuate, although not to the extent of investments such as individual stocks or bonds. 

As you research different mutual funds, consider the following:

1. Investment objectives
   Understand what the mutual fund is created to do. Every mutual fund has its own specific investment objectives. You can get an overview of the mutual fund by reviewing the Fund Fact Sheet created by the fund company. 
2. Risk ratings
   Standardized risk ratings for mutual funds are assigned by MorningstarTM, who use a mathematical tool to evaluate a fund over a three, five and ten-year period. The risk rating ranges from one to five stars—one star represents the lowest risk and five the highest. This risk rating system is designed to provide investors with a snapshot evaluation of risk and aid investors with fund selection.
3. Management costs 
   You should have a thorough understanding of the costs and fees associated with the fund. Generally, there are two central costs to an investor: management expense ratio (MER) and load/sales charges. Learn more about mutual fund fees and sales charges, click here.
4. Net Asset Value (NAV)
   Because mutual funds are baskets of securities, valuating the fund price can be challenging for new investors. The simplest way to determine the price of a mutual fund is by calculating the net asset value (NAV). NAV is essentially the total equity of a fund, calculated as the total fund assets less all fund liabilities. Similar to a stock price, the NAV is typically used as a price for transacting units in a fund. When you buy or sell units of a mutual fund, you usually do so at the price of the NAV, typically calculated at the end of each business day.

Yes, we have a wide selection of digital tools and resources to support in your research in helping you build your self-directed investment portfolio. You can click on the ‘Quotes & Research’ tab once you’ve logged into your account and select Mutual Funds

For more information on how to use our online tools and resources please visit our education section on ‘how to research your investments’

The MER is the total of the management fees operating expenses and taxes, and is deducted from the fund’s annual return. Fees can vary greatly, so it’s smart to look into each fund’s MER, alongside performance projections.

Each mutual fund pays an annual fee to its management company for overseeing the fund and its investments. The MER is shown as a percentage of the fund’s assets, usually ranging from 1% to 3%.

Unfortunately not, ETF’s and/or GIC’s do not offer any automatic purchase features and can be purchased easily on our Scotia iTRADE online platform.

Yes, iTRADE offers self-directed investors to purchase a wide range of investments from equities stocks, fixed income (bonds, GIC’s), or options. Check out our public site related to the Investment types we offer to purchase for clients.

As part of activities ahead of the June 1^st, 2022 regulatory date mutual fund companies will begin the process of switching mutual funds that have trailer fees into similar mutual funds (typically of the same fund family) without trailer fees. 

After June 1^st, 2022 only mutual funds without trailer fees can be held within an order execution only firm such as Scotia iTRADE. If you transfer a mutual fund with trailer fees, it will be switched into another mutual fund series of the same mutual fund without a trailer fee.
Additional Information:  Deferred sales charge (DSC) mutual funds may not be accepted for transfer into Scotia iTRADE after March 1^st, 2022

As mutual fund switches are being processed by mutual fund companies into non-trailer paying mutual funds you can find more information about the transaction by checking your transaction activity/history online and reviewing the trade confirm and fund facts document related to the mutual fund switch transaction. As a reminder trade confirms are available within the document centre along with other account documents e.g., statements, tax.

Alpha 
A measure of selection risk (also known as residual risk) of a mutual fund or other security in relation to the market. A positive alpha is the extra return awarded to the investor for taking a risk, instead of accepting the market return. For example, an alpha of 0.4 means the fund outperformed the market-based return estimate by 0.4 %. – A negative alpha such as -0.6 means a fund's monthly return was 0.6 % less than would have been predicted from the change in the market alone. 

Analyst 
Employee of a brokerage or fund management house who studies companies and makes buy and sell recommendations on their stocks. Most specialize in a specific industry 

Beta 
The measure of a fund's risk in relation to the market. 0.7 means the fund's total return is likely to move up or down 70 % of the market change; 1.3 means total return is likely to move up or down 30 % more than the market. 

Early redemption fee 
A fee which may be charged by a broker or Mutual Fund company, for selling a mutual fund which has not been held for a required minimum period. 

Fund family 
The management company that runs and/or sells units of the fund. Fund families often offer several funds with different investment objectives. 

Minimum purchases 
For mutual funds, the amount required to open a new account (Minimum Initial Purchase) or to deposit into an existing account (Minimum Additional Purchase). These minima may be lowered for buyers participating in an automatic purchase plan. Brokers selling mutual funds may require higher minimums than the Fund Company. 

• Money market fund 
  A mutual fund that invests only in short term securities, such as bankers' acceptances, commercial paper, repurchase agreements and government bills. The net asset value per share is usually maintained at a specific price such as $1.00 or $10.00. Such funds are not federally insured, although the portfolio may consist of guaranteed securities and/or the fund may have private insurance protection. 

• Mutual fund 
  An open-end investment company that pools investors' money to invest in a variety of stocks, bonds, or other securities. A mutual fund issues and redeems shares to meet demand, and the redemption value per share is the net asset value per share, less in some cases a redemption fee which represents a rear-end load. 

• Net asset value (NAV) 
  The value of a fund's investments. For a mutual fund, the net asset value per share usually represents the fund's market price, subject to a possible sales or redemption charge. For a closed end fund, the market price may vary significantly from the net asset value. 

• No load mutual fund 
  An open-end investment company, shares of which are sold without a sales charge. There can be other distribution charges, however. A true "no load" fund will have neither a sales charge nor a distribution fee. 

• Objective (MUTUAL FUNDS) 
  The fund's investment strategy category as stated in the prospectus. There are more than 40 standardized categories. 

• Prospectus 
  Formal written document to sell securities, describing the plan for a proposed business enterprise, or the facts concerning an existing one, that an investor needs to make an informed decision. Prospectuses are used by Mutual Funds to describe the fund objectives, risks and other essential information. 

• Redemption charge 
  The commission charged by a mutual fund when redeeming shares. For example, a 2 % redemption charge (also called a "back end load") on the sale of shares valued at $1000 will result in payment of $980 (or 98 % of the value) to the investor. This charge may decrease or be eliminated as shares are held for longer time periods. 

• Trailer Fees
  A trailer fee is a percentage-based commission that the mutual fund pays to an advisor, salesperson, or institution. As part of the total cost of a mutual fund referred to the Management Expense Ration (MER) you can see whether a mutual fund pays a trailer fee by checking the mutual fund’s fact sheet or prospectus, which is available on the mutual fund company’s website

• Turnover 
  A measure of trading activity during the previous year, expressed as a percentage of the average total assets of the fund. A turnover ratio of 25 % means that the value of trades represented one-fourth of the assets of the fund