Whether it’s to provide an income stream to meet financial needs or as a counter to the more volatile parts of your portfolio, there’s always a need for safe fixed-income or cashequivalent funds. These fund types can play just such a role.
Money market funds. These may not offer much returns potential in a time of historically low interest rates, but your holdings are extremely secure. Money market funds are generally considered the safest mutual fund investments and also provide liquidity for easy access to funds when other investment opportunities arise.
Mortgage funds. These funds hold Canadian residential and commercial mortgages and are designed to provide a steady stream of income. Traditionally, these funds have invested in high-quality mortgages and have provided low-volatility and good security of capital.
Income funds. These funds focus on providing a steady stream of income, often along with some possibility of capital gains. Some of the best choices for stability include short-term bond funds and government bond funds.
Balanced funds. Because they invest in both stocks and fixed-income investments, holdings in one asset class can offset volatility in another. The result can be steadier performance than that of funds holding just one type.
Some of these funds are unlikely to lose value while others may have the potential to decline during extreme market turbulence. However, those that decline are likely to fare better than funds that focus on more aggressive investments such as growth stocks.
It’s important not to go overboard on conservative investments at the expense of growth potential. The balance of security, income, and growth that’s right for your risk tolerance and investment goals should drive your choices. Let’s talk if you feel that it’s time to review your situation.
Larry Kleinmintz, R.H.U., T.O.T., M.D.R.T.
This newsletter is sponsored in part by Dynamic Funds. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performances may not be repeated. Dynamic Funds® is a registered trademark of its owner, used under license, and a division of 1832 Asset Management L.P.
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