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Our response:

A mutual fund is a collection of underlying investments, such as stocks, bonds and other funds. Like all investments, mutual funds have their risks – you could lose money on your investment.  The level of risk and return depends on what the fund invests in. While mutual funds can make it easy to own a variety of investments, not all investments perform well at the same time. Different investments react differently to work events, factors in the economy like interest rates, and business prospects. So when one investment is down, another might be up. Having a variety of investments can help offset the impact poor performers may have, while taking advantage of the earning potential of the rest. This is called “diversification.”

Visit GetSmarterAboutMoney.ca to learn how mutual funds work or speak with a registered financial representative for advice that fits your personal situation.