Understanding how your mutual fund is doing depends on many factors. Here are a few different ways to tell if you’re getting the most from your fund.
1. Read Fund Facts
This is a user-friendly guide that provides key information about your mutual fund including fees and performance. Beginning May 30, 2016, mutual fund companies are required to give investors a copy of Fund Facts before they decide to purchase a conventional mutual fund. Check out a sample Fund Facts.
2. Compare it to other mutual funds
Use resources like Globefund or Morningstar to see how a mutual fund is performing relative to other similar funds.
3. Use a benchmark
Compare a fund’s performance against a relevant benchmark such as a market or sector index that tracks a group of selected investments (for example, the S&P 500 Index). Use this portfolio benchmark calculator to see how your fund compares.
4. Add up the fees
Fees and expenses reduce your fund’s returns. Use the mutual fund fee calculator to see how fees and other costs affect what you make.
You can learn more about the structure of mutual fund fees in Canada and current issues surrounding their structure from the Canadian Securities Administrators.
5. Disclosure documents
These documents contain information that can help you to assess a mutual fund. Securities regulators require mutual funds to file documents such as:
- Fund Facts
- the simplified prospectus
- the prospectus
- independent review committee reports
- management reports of fund performance
- quarterly portfolio disclosure
They’re available from
- the mutual fund company, and
- the System for Electronic Document Analysis and Retrieval (SEDAR).
6. Review account statements
Review your account statements to see how your investments are doing and keep track of the costs you’re paying. Then compare the performance of your stocks against your goals and the guidelines set out in your investment policy statement, if you have one.
Cost and performance disclosure requirements
The Canadian Securities Administrators are implementing new requirements to ensure all investors receive essential information about the costs and performance of their investments. Learn more about these new requirements.
7. Consult your advisor
If you have an advisor, ask them to explain why your funds’ prices have suddenly fallen or risen — and what that means for your portfolio.
8. Follow stock market news
Are we in a bear market? A bull market? Is the market up or down in general? Stock prices are affected by what’s happening in the market, not just at the companies that make up your fund. You can find lots of information at the Toronto Stock Exchange.
9. General economic news
Read the business sections of major newspapers to find out what’s happening in the economy. Are interest rates going up? What’s the inflation rate? How is the Canadian dollar doing against other currencies? Learn more about how economic factors can affect stock prices.
Warning
Don’t chase performance. Just because a fund did well last year doesn’t mean it will achieve the same return this year. Make sure it fits with your investment goals and your other investments.
Key point
How a fund has performed in the past can’t tell you how it will perform in the future. But it can give you an idea of how the fund has performed in different market conditions.
Caution
Fees reduce the return on your investment. The management fees and operating expenses (MER) paid by a fund are reflected in its published rate of return.
