By James Gauthier, CIO, JustWealth
Special to the Financial Independence Hub
The advent of the mutual fund was one of the greatest innovations in the field of finance. Mutual funds created a practical means for common folks to invest in the markets which used to be only accessible by the wealthy.
The mechanics of how mutual funds operate have not changed much in the many decades since they have been around. Simply put, a group of investors pool their money together and form a unit trust where all investors get a pro rata ownership of what they contributed to the pool in the form of units (or shares). The pool is then used to buy a number of underlying investments such as stocks or bonds.
At the end of each day, all investments in the trust are priced and a Net Asset Value (or NAV) is determined by dividing the total value of the trust investments by the units outstanding. Investors who want to purchase shares of the trust may do so based on the NAV established at the end of each day.
Mutual funds have been available to Canadians for over 80 years, and now number more than 15,000 worth well over $1 trillion. Companies or individuals who sell mutual funds like to promote the benefits of mutual funds: Continue Reading…