As of June 13, 2014, dealers must send a Fund Facts document to investors within two days of buying a mutual fund. They no longer are required to send a prospectus.
Fund Facts is a document written in plain language, no more than two pages double-sided and highlights key information about a mutual fund that research conducted by the Canadian Securities Administrators (CSA) has identified as important to investors.
Here are some of questions the Fund Facts document asks and answers for investors.
What does the fund invest in?
- This is where you will find a snapshot of the fund’s holdings as of a specific date, including the top 10 positions of the fund, what percentage of net asset value they represent, and the investment mix.
How risky is it?
- This section contains a table with an investment risk rating. There are five ratings available for the fund to use: “low”, “low to medium”, “medium”, “medium to high”, and “high”. The fund will identify which category it falls under using the risk classification methodology chosen by its manager.
How has the fund performed?
- Here you will find past performance of the fund, with average and year-by-year returns going back 10 years if the fund has been around that long. If not, this section will show the fund’s performance from the date it was created and became a reporting issuer. Returns are after the deduction of expenses, which can reduce the fund’s returns.
Who is it for?
- This part of the document discusses suitability – the kind of investor and the type of portfolio the mutual fund is designed for.
How much does it cost?
- If you want to know what kind of fees you are paying, you will want to go over this section in detail. This is where you will find explanations about sales charges, fund expenses – the Management Expense Ratio (MER) (including the trailing commission) and the Trading Expense Ratio (TER) – and other fees.
The Fund Facts document also contains a “Quick facts” section, which gives you an overview of the fund, including its value on a particular date, who manages it, and the required minimum investment, among other things. Additionally, there are sections in Fund Facts where you can find out about your rights, how to contact the fund manager, and how taxes might affect you.
Over the past few years, I have read many stories about people who are managing their own money through online brokerage firms. The trend toward self-directed investing gained momentum during the financial crisis when people felt their financial advisor was not meeting their needs. Going at alone is also attractive to younger investors who want […]
For Financial Literacy Month, the Canadian Securities Administrators (CSA) launched an online Fund Facts tool that takes investors on a guided tour of a sample Fund Facts document. Investors can use this interactive tool to learn to identify a fund’s principal investments, past performance, risk rating, and cost to investors. BCSC InvestRight also offers a […]