604-806-1000 Info@pretiumwealth.ca
Daily, I’m asked why should I invest in mutual funds over choosing individual stocks? Investors may think that the transactional costs associated with managing individual stocks are more effective than paying the fee of a professional money manager. They may also believe that owning individual securities gives great choice, flexibility and control. Well, to achieve your long-term financial goals you need to reduce risk and here is why mutual funds may be a better option.

1. The benefits of professional management

The portfolio management process is a continuous approach to designing your investment plan that sets investment objectives, develops and implements an asset mix, monitors the economy and market, and adjusts the portfolio and measures performance.

Mutual funds provide diversification within asset classes. While you could structure a balanced portfolio on your own by purchasing shares, this approach can require your full-time attention.  Professional investment managers purchase and sell decisions in a portfolio 65 per cent of the assets in any given year. Does your broker devote enough time and resources for the management of your securities portfolio? These experienced professionals make educated investment decisions and work to pursue the fund’s objectives in the best interest of every unit holder- they continuously monitor their funds and have access to resources that most individual brokers will not.

2. Accessibility

Mutual funds give you access to global market and provide the opportunity to participate in almost any asset class around the world. The average investor would find it difficult to access certain foreign exchanges and certain funds on their own. For example, real estate funds provide access to a diversified portfolio of real property. They hold billions of dollars worth of real estate in commercial, industrial and residential properties. The average investor simply cannot reap the rewards of these types of products.

3. Liquidity

With individual securities you have to consider that there is price and commission with every sale and you can’t always sell your bonds with loss or penalty. With a mutual fund, investors can redeem when they choose, but depending on the type of fund, penalties may apply.

4. Diversification

Investment experts suggest you would need about 30 to 40 stocks in a portfolio to achieve proper diversification. That is a lot of stock picking for a broker. A mutual fund will invest in at least this many securities. As well, investors need to consider investing in markets across the globe for maximum amount of diversification and mutual funds will help provide that.

5. Convenience

Mutual funds offer many conveniences not possible through owning individual stock. With a mutual fund, you’re able to easily customize your portfolio as your needs change. For investors drawing an income, there is no need to worry about how withdrawals will affect individual security holdings. Portfolio managers continually monitor the amount of cash available for withdrawals and the remaining amount is invested in securities. Tax reporting is simplified and saves your time with consolidated tax slips.

All in all, with mutual funds you benefit from professional guidance while maintaining control of the big investment decision.

Often people pick stocks based on hot companies or tips. It is important to be strategic with your portfolio management and the portfolio approach is more strategic than a series of uncoordinated decisions.

Again, choose your options wisely and opt for choice, flexibility and control — the value you receive with mutual funds.


Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the Fund Facts before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.