Money market funds
Money market funds maintain a constant share value, typically $10, by investing 95% of assets in cash or cash-equivalent securities and short-term debt with approved ratings. They provide liquidity and income while keeping the principal safe, but they are exposed to interest rate risk. Distributions are taxable as interest income outside of registered plans.
Fixed-Income funds
Fixed-income funds prioritize steady income and principal safety over capital appreciation, with 95% of non-cash assets in bonds. They invest in various bonds, including Canadian, global, and high-yield. High-yield funds are more volatile and sensitive to interest rate changes. Managers adjust bond mixes to mitigate interest rate impacts.
Balanced funds
Balanced funds invest in both stocks and bonds, aiming for a mix of income and growth. The focus is on balancing safety, income, and capital appreciation, with allocations adjusted based on market conditions. The fund’s prospectus specifies the minimum and maximum weights for each asset class.
Equity funds
Equity funds invest 90% of assets in common stocks, with some short-term notes for liquidity. They carry market and growth risks, including foreign exchange risk for international investments. Distributions include capital gains and dividends. Small-cap and mid-cap funds target smaller, high-growth companies but are more volatile. Dividend funds focus on tax-advantaged income from preferred and high-quality common shares.
Commodity funds
Commodity funds invest either directly in physical commodities, or indirectly through derivatives, with leverage exposure capped at 100%.
Specialty funds
Specialty funds focus on specific sectors or regions, accepting concentration risk for potential gains. They can diversify a portfolio but are vulnerable to market swings in their niche area and are often more speculative.
Target-Date funds
Target-date funds adjust asset allocations over time, starting with growth-oriented investments and shifting to safer assets as the target date (usually retirement) approaches.