An investment fund pools together capital from many investors. Each investor has partial ownership and the fund invests according to the fund’s objectives. Investment funds offer a wide range of investment opportunities. They can also benefit from diversification, lower transaction costs and management expertise. This can help mitigate some of the risk that individual investors take on.
Types of Investment Funds:
These fund types serve similar purposes, fundamentally. They allow you to invest in a diversified portfolio of assets that you might not otherwise be able to gather yourself. But it’s important to understand the features that make each fund type unique.
Open-End vs Closed-End Funds
Open-end funds, like those offered by Fidelity, Vanguard and other leading mutual fund groups, continuously offer and redeem shares based on each day’s closing net asset value. Share’s are priced each day based on their net asset value (NAV).
Closed-end funds are different. They raise money on an IPO (initial public offering), just like a company going public, and then begin trading on an exchange.
Because these funds trade like stocks, you buy them through a brokerage account. And you can trade them intra-day using market orders, limit orders, or stop orders. They are marginable like stocks, too.
A closed-end fund’s market price at any given time may be higher or lower than its net asset value. If it is trading above the net asset value, it is said to be trading at a premium. If it is trading below the net asset value, it is trading at a discount.
Mutual Funds
Mutual funds are the oldest type of investment fund. Like the other types, they’re vehicles that pool money from investors to buy securities. The basket of assets is priced and sold to the public on a daily basis.
The daily basis part is an important distinction. Unlike the other fund types that we’ll discuss in a moment, the price of a mutual fund changes exactly once a day. In an actively managed mutual fund, the managers may trade the assets insidethe fund throughout the trading day. But you can’t make money trading shares of the fund intraday.
That’s part of the reason mutual funds are more popular for retirement planning. They’re not good for day traders, but they’re great for savers who want to grow their money over a long period of time.
Mutual funds come in a few flavors. Closed-end mutual funds are the simplest type. They have a fixed number of shares that can be bought or sold only when they’re available on the market. There are also open-end funds, which can create and retire new shares based on investor demand. And then there are unit investment trusts (UITs), which are static portfolios of securities with no management.
Mutual funds have many advantages. They allow investors to buy into a diversified portfolio of high-value assets without having to manage that portfolio. However, that convenience comes at a price… Mutual funds (especially actively managed ones) often charge fees that may eat away at returns.
Another disadvantage of mutual funds is their tax inefficiency. Money in a mutual fund is usually tax-exempt as long as it stays invested. But when a mutual fund sells some of its portfolio at a profit, it is required by law to distribute those profits to shareholders. Those payments are taxable.
ETFs (Exchange-Traded Funds)
An ETF is a listed security that tracks an index consisting of a portfolio of individual securities. As with mutual funds, when you buy an ETF, you don’t pick a specific security. Instead, you choose a particular asset class, sector, theme, country or investment strategy.
Two notable types of ETFs are leveraged ETFs (which track some multiple of the price of their underlying assets) and inverse ETFs (which track the opposite of their underlying assets). These funds give traders the ability to amplify or hedge their bets without using complex instruments like derivatives.
The ability to trade ETFs intraday can be an advantage in some situations. If the market crashes, for example, you can sell before the end of the trading day. With a mutual fund, you’re stuck waiting until 4 p.m. to sell, at which point the fund may have shed significant value.
But the ability to trade actively can also be a handicap. Those who trade frequently risk trading on impulse or anxiety. And that’s a recipe for buying high and selling low. Mutual funds don’t give you the option of making reckless intraday trading decisions.
With ETFs, you can invest in everything from stocks, bonds and the U.S. technology sector to Dividend Aristocrats, Russian small caps and even timber. ETFs also offer distinct advantages over traditional mutual funds…You can buy and sell ETFs as easily as you buy a share of Apple (Nasdaq: AAPL).
Finally, ETFs tend to be a bit cheaper than mutual funds. They don’t have to distribute realized capital gains to shareholders, so they tend to come with a smaller tax bill. Also, many ETFs are passively managed, which means a lower expense ratio.
ETFs don’t have big investment minimums. They’re generally more tax-efficient. And you can invest in ETFs that offer leverage or even profit when markets go down. No wonder ETFs have come to dominate stock exchanges over the past decade.
Hedge Funds
Hedge funds pool huge amounts of money from wealthy investors, Wall Street banks, and, yes, other hedge funds. Their goal is to make money regardless of which way the stock market goes. Some of them invest in bonds, some in commodities, some in foreign markets, some in futures and options. Some short stocks, betting their prices will fall, not rise.
Others turn almost any kind of cash flow – including credit card payments, home mortgages, corporate loans, plane leases, and even movie theater revenue – into securities and trade them. Hedge funds hold unparalleled sway over the world’s financial markets today. They are responsible for a good chunk of all stock trading in the market.
Much of what they are doing is good. For example, hedge funds help spread investment risk among many partners. In some ways, this “risk dispersion” has acted like a safety valve for investment banks and other lenders. However, with so much leveraged money sloshing around in these funds, the potential for catastrophe is increasing. Also, hedge funds are struggling to beat the market but still charge higher fees.
Index Funds
Index funds aren’t their own type of fund. For example, there are both ETFs and mutual fund index funds. Still, they’re worth discussing because they have a unique asset profile.
As the name implies, index funds are baskets that try to contain all the securities in a particular index. You could spend a fortune buying a weighted amount of stock in the 500 largest public companies in America… or you could just buy a few shares of an S&P 500 index fund.
Index funds represent some of the most diversified investment vehicles on the market. Instead of picking and choosing different securities, you get a piece of everything. This strategy can generate a steady returns with lower risk.
Index funds can be valuable to long-term investors because of their simple strategy. Betting on the market’s long-term trends can be a great move.
Few active managers and traders outperform the benchmark indexes over a period of decades. However, an actively managed fund may earn bigger short-term gains than an index fund would.
Types of Investment Funds Summarized
As you can see, mutual funds, ETFs, hedge funds and index funds are all similar concepts, but there are a number of nuanced differences between them. These are important to understand for any investor.
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Losing a loved one is never easy, and the legal steps that follow can add even more stress to an already difficult time.
For years, families in Vancouver (and Canada in general) have struggled with a complex probate process—filled with paperwork and legal challenges.
Thankfully, recent changes to Canada’s probate laws aim to make this process simpler and easier to navigate.
Let’s unearth how these updates can simplify the process for you and your family.
What is probate?
Probate might sound complicated, but it’s simply the legal process of settling someone’s estate after death.
Here’s how it works.
Validating the will. The court checks if the will is legal and valid.
Appointing an executor. If named in the will, the executor manages the estate. If not, the court appoints someone.
Settling debts and taxes. The executor (and you) pays debts and taxes before anything can be given.
Distributing the estate. Once everything is settled, the executor distributes the remaining assets according to the will or legal rules.
Probate ensures everything is done by the book, giving you peace of mind during a difficult time.
Recent Changes in Canadian Probate Laws
Several updates to probate law in the country are making the process smoother for you and your family.
Here’s a closer look at the fundamental changes that are making a real difference.
1) Virtual witnessing of wills
Now permanent in many provinces, including British Columbia, wills can be signed and witnessed remotely through video calls.
Such a change makes estate planning more accessible, especially for those in remote areas or with limited mobility.
2) Simplified process for small estates
Smaller estates, like those under 25,000 CAD in BC, now have a faster, simplified probate process.
Fewer forms and legal steps mean less hassle for families handling modest estates.
3) Substantial compliance for wills
Courts can now approve wills with minor errors if they reflect the person’s true intentions.
This update prevents unnecessary legal challenges and ensures the deceased’s wishes are respected.
These changes help make probate less stressful and more efficient for you and other families across Canada.
The Probate Process and You: The Role of a Probate Lawyer
(Image: Freepik.com)
Working with a probate lawyer in Vancouver can significantly simplify the probate process, especially given the city’s complex legal landscape.
Here’s how they can help.
Navigating the legal process
Probate lawyers ensure all legal steps are followed, preventing costly mistakes and ensuring the estate is managed properly.
Handling paperwork and deadlines
They manage all the paperwork and court deadlines, taking the burden off of you during this difficult time.
Resolving disputes
If conflicts arise, probate lawyers resolve them, avoiding legal battles.
Providing you peace of mind
With a probate lawyer’s expertise, you can trust that the estate is being handled efficiently and according to the law.
With a skilled probate lawyer, you can ensure the entire process is smooth and stress-free.
Why These Changes Matter
The updates to probate law make a big difference for Canadian families. Here’s why.
Less stress for you. Simplified processes mean you can focus on grieving, not paperwork.
Faster estate settlements. Estates are settled more quickly, so beneficiaries don’t face long delays.
Fewer disputes. Courts can now honor will with minor errors, reducing family conflicts.
Accessible for everyone. Virtual witnessing and easier rules for small estates make probate more accessible for everyone, no matter where you live.
With these changes, probate becomes smoother and more manageable for you and your family.
How to Prepare for the Probate Process
Even with the recent changes, being prepared makes probate smoother. Here are a few steps to help you prepare.
Create a will. Ensure a valid will is in place to avoid complications.
Choose an executor. Pick someone responsible for managing the estate and discuss their role with them.
Organize documents. Keep key financial and legal documents in one place for easy access.
Talk to your family. Have open conversations with your family to prevent future misunderstandings.
Get legal advice. Consult with a probate lawyer to ensure everything is legally sound and up-to-date.
These simple steps make the probate process easier for everyone involved.
Wrapping Up: Making Probate Easier in Vancouver
Recent updates in probate law are simplifying the process for families, from virtual witnessing to easier estate rules. These reforms are designed to ease the burden, helping you focus on what matters—grieving and respecting your dead loved ones’ final wishes.
Despite these changes, it’s best to consult a probate lawyer to ensure you can manage everything properly. Remember, they’re here to help you during this difficult time.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
