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Index Mutual Fund

To break it down, the concept behind a mutual fund is simple. When you buy a mutual fund, you are pooling your money with that of other investors. Professional investment managers then take that money and invest it in a variety of different ways. This gives you the benefit of diversification, meaning being invested in many different companies at once.

An index mutual fund is a mutual fund that aims to track the performance of a specific stock or bond index, such as the S&P/TSX Composite Index. And because index mutual funds don't rely on fund managers to pick investments, they have lower management fees and trading costs than actively managed funds. All CIBC index mutual funds offered by CIBC Securities Inc. for clients of Simplii Financial are eligible for inclusion in your RRSP, RRIF, TFSA, RESP and locked in plans.

 

Benefits of Index Mutual Funds

Typically, only people with large amounts of money are able to work with professional investment managers to plan their investment mix. Mutual funds allow you to benefit from the skills of professional investment managers, with only a modest investment. In addition, since mutual funds pool your money with that of other investors, you have increased purchasing power and lower management costs than an individual investor would have.

When you invest in a mutual fund, you're actually buying a stake in the many different investment instruments that the fund holds. This diversification reduces your overall risk, as a decline in one investment in the mutual fund may be offset by the strength of another. Most individual investors cannot readily match the level of diversification available through a mutual fund.

Inflation can eat into the value of your savings over time. However, if you hold a mix of mutual funds in your portfolio, with at least a portion in equity funds (which are higher risk investments), you may benefit from the long-term growth potential that equity funds can offer, while attempting to protect yourself from inflation. It can take some discipline to ride out the inevitable ups and downs of the markets, but those who do may have the greatest potential to gain over the long term.

6 things to know when investing in mutual funds

The number one rule is, it's important to diversify! That's the advantage of index mutual fund portfolios. They keep your investments on track by monitoring your portfolio on a regular basis to make sure it maintains the right mix of funds. If your fund mix changes − because some funds grow faster than others − the portfolio will automatically rebalance itself twice per year to make sure it continues to match your needs.

Let's start by selecting which index portfolio is best for you.

Prefer a more tailored approach? Speak to one of our mutual fund representatives to build your own portfolio from our selection of individual mutual funds

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