my money At a Glance Helping You Understand Financial Planning and Investments Questions & Answers on Investments Why can’t I find my funds in the newspaper or on other websites? What is the best investment for me? The funds offered through Sun Life Financial are pooled funds (segregated funds) offered only to group savings plans such as Registered Pension Plans or Group RRSPs. These funds are institutional funds and are not listed in daily newspapers or on other financial Web sites. The funds that are listed are mutual funds offered to the individual investor. The best investment for an individual is determined by their financial goals, time horizon (number of years until they plan to use the money), and risk tolerance. Unfortunately, there is no magic formula for picking your investments. Various investments perform differently in the market; this is either suitable or not depending on the investor’s risk tolerance. Sun Life Financial’s Plan Member Services website, provides rates and values details, as well links to the fund managers’ quarterly investment reports. I’ve noticed my account dropping in value over the last few months. Should I move my money? A drop in market value does not equate to a loss in dollar terms. Market-based funds will fluctuate in value based on stock market performance, and a change in interest rates. You ‘lock in’ a loss when you move your money between funds. This is because we must sell units that you hold in a given fund in order to buy units in the funds that you wish to transfer your money to. If you transfer money from a fund that has dropped in value, chances are that they will be selling units at lower unit value than the value at which these units were purchased. This creates a loss. We recommend you choose funds based on your investment objectives and risk tolerance and remain invested through market fluctuations. Consider changing your portfolio when your personal situation changes, as opposed to short-term market fluctuations. This information is provided to the Academic Money Purchase Pension Plan Members from the Academic Money Purchase Pension Committee (AMPPC) as part of the ongoing information and communication strategy. This document and future communications are available online at: www.usask.ca/fsd/pensions For example, an investor with less than five years until they need the money is likely looking for stability and capital preservation of their existing assets. This investor could select fixed income securities or money market funds – funds that will offer some a positive return and the least possibility for a negative one. A bond fund is not the “best” investment for an investor looking to retire in 2030 and wanting his capital to grow at a pace faster than inflation. It’s important to set a financial goal for yourself and use various funds to achieve it, whether you are 25 or 55. Continued What kind of fund will provide safety and a high rate of return? The return you earn on your money is positively linked to the amount of risk you’re willing to take. For example, if you are currently invested in guaranteed interest-rate accounts, expect a 3-5% return per year. If you want a higher return, you may look at equities, but expect ranges to fluctuate in the short term. The higher return you desire, the more volatility you must be willing to accept. This means short-term changes in the funds unit value. The key is to focus on a realistic return based on the amount of risk you are willing to accept. What is a balanced fund? A balanced fund is sometimes called a diversified fund, and holds segments from the main types of asset classes. This means within a balanced fund, you’ll find Canadian equities, American equities, International equities, as well as bonds and money market instruments. Its success comes from diversifying itself among these asset classes, and reducing the risk of the overall portfolio. The investment manager actively manages the asset classes and re-balances them according to market conditions. This allows the investor to “leave it to the experts” in terms of their money management. A balanced fund is deemed a moderate risk investment. What is an index fund? This is a “passively” managed fund. In other words, the fund manager does not research and analyze individual stocks before selecting them as investments in the fund. The fund is made up of all the stocks and bonds that are included in the underlying index (like the Toronto Stock Exchange (TSX)). It holds the stocks or bonds in the same weighting as the underlying index, and closely matches the performance of the index or indices that it tracks. Index funds don’t try to “beat the market”. How many funds should I hold in my portfolio? You’ll first need to decide what your time horizon (number of years to retirement) looks like and how comfortable you are with risk. Next, you’ll need to decide what percentage of your money you’d like to invest in various risk categories, such as guaranteed interest accounts; fixed income; and equities. Depending on your profile, you may want to consider including funds in the various asset classes that have different management styles and offer geographic diversity. i What’s the difference between a segregated fund and a mutual fund? Segregated funds are governed by the Insurance Act of Canada, while mutual funds are governed by the securities act of various provinces through their securities commissions. Like a mutual fund, a segregated fund is a pool of money contributed by many investors and invested on their behalf by a professional money manager. Unlike individual mutual funds, they can only be sold by insurance companies. Segregated fund returns are not published in the public media reports. The underlying individual mutual funds do however report their unit values in newspapers, but don’t have the same unit values as the equivalent segregated funds offered by Sun Life Financial. Administrative fees on segregated funds are typically lower that fees on mutual funds. This is due to lower costs associated with administering these funds. If you would like to see the unit values of your funds, sign into www.sunlife.ca/member. If you have a general question or suggestion about this newsletter, please send an e-mail to [email protected] or write to my money At a Glance Newsletter, Group Retirement Services Marketing, Sun Life Financial, 225 King Street West, Toronto, ON M5V 3C5. This bulletin has been created exclusively for you. It addresses issues to help you with your financial planning and investments, and cannot be reproduced in whole or in part without the express permission of Sun Life Financial.