Mutual Funds Canada
The mutual funds in Canada showed a tremendous growth during the 1990’s and hence become one of the fastest growing financial service sectors in Canada. The asset grew from $25 billion to a whopping $426 billion in 2001. Various factors have contributed to this enormous growth in the Canadian mutual fund industry. Firstly, the entry of the banks contributed in Canadian mutual funds to become popular among ordinary citizen. Secondly, with the population boom mutual funds in Canada have become a mode of money saving technique for retirement. In 1990, the equity market in Canada was strong, hence this too contributed in the Canada's mutual fund sector to grow.
Mutual Fund-Industry Structure in Canada
Mutual fund Canada, is a company or a trust responsible for fund raising, by selling unit of mutual fund or Canadian stocks to investors. Mutual fund Industry in Canada, hires professional who are capable of investing in such a way so as to gain certain objectives, such as capital gain, liquidity and low risk. About eighty companies exist in Canada who deals in mutual funds. Each of these firms is responsible in dealing with investor’s intention varying with regards to tax treatment, risk, liquidity and income.
Mutual Fund Canada vs. Individual Canada stocks
Various products exist in the mutual fund industry in Canada. Some of them are Canadian money market funds, bond funds, dividend funds, equity funds Canada and many others. Apart from these, other mutual funds differ from the risk levels that they carry as well as the TSX index level.
Mutual funds and Canadian common stock are entirely on a different level. Usually the investor has no power when it comes to purchasing mutual funds as it is done entirely by a professional fund managers but as for individual Canadian shares, the control remains in the hands of the Canadian stock investor. However, some argue that mutual funds have certain advantages over ordinary stocks. The core advantage of Canadian mutual fund is that of diversification, which reduces the risk level. Individual stocks aren’t diversified and hence if the stock price in Canada goes down the investor is sure to lose money. Furthermore, mutual funds are handled by professional so the question regarding proper equity research in Canada does not arise. These professionals can speculate correctly about the stock market trends in Canada. As for the individual stock market, it is assumed that the common investor does not have enough financial information or financial advice about the Canadian Stock and bond market.
Canada Mutual Fund or Canadian Stock-The question is which to choose?
Investors should understand that when they purchase a piece of Canadian company stock, they are actually purchasing a piece of that company. However, if they purchase a piece of mutual fund, they are buying a collection of stocks, bonds and other securities. These Canadian company shares are managed by professional investment company. So the decision of choosing between mutual fund and individual stock lies entirely in the hands of the investors.
Investors who are willing to spare time and do stock analysis in Canada on their own, find that investing in shares is best for them but in case you want a professional to handle your investment portfolio then mutual fund is the best choice to go for. In mutual funds, the transactions are recorded periodically and investor receives a statement of their holdings. On the other hand, Canadian stock report needs to be maintained individually which sometimes becomes a hassle. Therefore, we can conclude by saying that investors who like the thrill of single stocks can opt for the Canadian stock market while those who are willing to take financial advice before investing then mutual fund is right choice for them.
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