How to choose the right investment funds for you
When it comes to investing, there is no one-size-fits-all solution. The right investment strategy for you will depend on your individual circumstances, including your financial goals, risk tolerance and investment timeline. However, there are some general principles that can help you choose the right investment funds for your portfolio.
Consider your financial goals
What are you hoping to achieve with your investments? Do you want to generate income, build capital, or preserve your wealth? Your answer to this question will help you determine what kind of investment fund is right for you.
For example, if you are looking to generate income, you might want to consider investing in a bond fund. On the other hand, if your goal is to build capital, an equity fund might be a better option.
Think about your timeline
A key factor to consider when choosing an investment fund is your timeline. Are you investing in the short-term or the long-term? If you are planning on investing over the long-term, having more time to ride out market volatility might make you feel more comfortable with taking on more risk.
However, if you are investing over the short term, you may want to stick with less volatile investments, such as money market funds, bond funds or Guaranteed Investment Account (GIAs).
Assess your risk tolerance
It is also important to think about how much risk you are willing to take on. Investment funds vary in terms of risk and return potential, with some funds being more volatile than others and coming with a higher degree of risk. However, these funds also have the potential to generate higher returns.
If you are comfortable with taking on more risk, you might want to consider investing in a growth fund or an equity fund. On the other hand, if you prefer to play it safe, a bond fund or money market fund might be a better option for you. You can take an investment personality questionnaire | PDF 946kb to determine how comfortable you are with risk.
Diversify your holdings
Another important principle to keep in mind when choosing investment funds is diversification. Diversifying your portfolio across different asset classes, sectors and geographical regions can help reduce your overall risk. For example, if you are investing solely in equity funds, you are more exposed to market volatility than if you were to invest in a mix of equity funds and bond funds. By diversifying your holdings, you can help reduce some of the risks associated with investing.
Fees and expenses
As a group savings plan member, you benefit from fees that are typically lower than what you’d pay if you invested through a bank or other retail institution. But it’s still important to factor in fees and expenses when choosing the investment funds that are right for you as some come with higher investment management fees than others. Sign into your group savings plan to compare fees before deciding.
How to evaluate the performance of an investment fund
When choosing an investment fund, make sure to evaluate the performance of the fund. You can do this by reviewing the various elements of a fund report. Some of these elements include:
Total operating expenses
Volatility meter
Investment manager
Historical performance
Compound returns
Calendar year returns
Top holdings
Analyzing these elements of your fund report can give you a good look into how your investment funds are performing year over year. From there, you can make vital adjustments to ensure that you are allocating your money wisely to meet your financial goals. You can access your fund report by logging onto your savings plan online.Opens a new website in a new window
With careful consideration and due diligence, you can choose an investment fund that fits your needs and helps you reach your financial goals. It is encouraged to access the helpful tools and resources available to you at Canada Life so that you can choose the funds that are best for your financial goals.