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T hé C and iapion, Frldy, February 4, 2000--" Estate,,& Financia Plannin I'ow Many Mutual Funds Should Yeu Own? ailable, its tempting to invest in veral. After ail, the benefit of diversifica- *on is you reduce the risk of losing oney by avoiding having ail your gs in one basket, right? Weil, you do want diversification. ut Wts a mistake to assume you will uomatically get this if you own an funds. Picking the right types of nds is the key. Many Canadians own several funds at hold the same types of securities nd give the same types of returns. ýis is not diversification. iversification cornes from owning nvestents in the three asset classes f cash and equivalents, fixed-income, ,nd euities. You can get added diver- ification by owing securities from different countries and types of indus- r ies. Take A alo» Look At What You Own Check the fund's annual or quarter- ly finencial statements to see whats in the fund's investment portfolio. If you hold Canadien equity funds from two different mutuel fund compenies, for example, take e look et what compe- nies they invest in. If they invest in similar companies, holding both isn't likely giving you any added diversifi- cation. Look et your funds' annual returns over the last 10 years. If they invest in a lot of the same companies. their returns will probably be similar. When one does badly, the other one will too. What you want is funds that aren't correlated. You need funds that will perform well when others in your portfolio may do poorly. What Is The. Magkc Number? There is no magic number for how many funds you should own. The exact number depends on your par- sonal preferences, financial goals. and stage in life. But there is a basic num- ber to start from, and itfs very low- three. See me for al yourfamily insurance needs. Shaki V. William, Agent 3006 Derry Rd. West, Suite 204 Milton, L9IT 5B5 (905) 693-1400 STASE FARM Like a good neighbor; IlStaie Farmn INURNE is there.' State Farm insurance Comparnes Canadien Head Office: Scarborough, Ontarj If you hold a mutuel fund in each of the three esset classes you are on your way to having a well- diversified portfolio. Thats because each of the esset classes serves different pur- poses. and each tends to gain or lose value et differ- ent times. Cash and equivalents such as government trea- sury buis or T-bills are safe, short-termn investments. They cen be quickly turned into cash for emergencies or unexpected expenses. Money market mutuel funds invest in government treasury bills. Fxed-incomne invest- ments such as bonds and debentures provide reguler income in the form of inter- est peyments, and carr lim- ited risk. A bond fund is an exemple. Equity investments such as stocks are riskier then cash or fixed-income, but offer the potentiel for sub- stantiel growth over the long term. Mutuel funds holding stocks are equity investments. By holding a mutuel fund in each of these class- es you will have liquidity, income, and long term growth. As well, these investments do not ail move in the same direction et the same time. For exem- ple. when equity markets are down, bonds usuelly do well. Vour entire portfolio will not suifer if one of your funds is doing poorly. Asset allocation is the neme for determining whet percentege of eech of these esset classes you should own. It changes as you go through the different stages in your life, and your investment needs change. Dlvify Wflhn Eedi Me»t Cus You cen diversify even further by holding different funds within each asset cless. Vour equity invest- ments could be a combina- tion of Canadien equity funds and foreign equity funds. Or your fixed-income investments might be Canadien as well as foreign bond funds. What is cur- rently happening in the Canadien equity or bond markets cen be quite differ- ent from what is happening in other markets around the world. By investing in a global mutuel fund, you cen spread your investment risk even further. If the Canadien markets are down, the European or Asien markets mey be doing well. Diversification cen be done by industry and company as well. Your Canadien equity fund might hold the stock of established, blue-chip compa- nies. You might want to hold enother fund thet concentretes on smaller companies with growth potentiel, or in e particuler industry, like technolo- gy, or naturel resources. Asset Allocation How much of your investment money you ellocete to eech asset class depends on what your finencial goals are, and your stage of life. For exemple, i7fyour goal is to retire in 20 years you probably need to invest only about 5 percent to 10 percent in cash and equivalents for emergencies. Then, depending on whether you are prepared to accept more risk in exchange for greater potentiel Iong-term growthi, you might invest a higher percentage of your money in equities than fixed- income investments. The money you put into fixed-income investments helps to reduce the overail risk level of your portfolio and provides some income. [More details on investment basics are aveilable from the not-for-profit Investor Leaming Centre of Canada (ILQ in their plain-languege Bottom Line Guide To lnvesting. Vou can order it for $9.95 by credit card by phoning 1- 888-452-5566, or by visiting the ILC Web site at www.investorleaming.ca.] BRAD CL!MIET jargon tom. INVESTMENTACCOJNTS 87846576 0 O ON WALT ELUIOT - wARF 876-3377 *àO *311% RESPe S.«« MM~AL FUNDS UIFE & SEGREGATED FIJNDS ~ 'ustDISASILTY LABOUR SPONSOAED FUNDS Ytmot0eINSURANCE ""SON TWu" FINANCIAL SERVICES The R.R.S.P. Advantages offered by Bob Lee & Kim Mitchell A Retirement Financial Specialist office with 25 years o xpenience and the coffee's always been great! e Secunity of investments (100% fund guarantees) e Competitive segregated and mutual funds. e Competitive G.I.C. interest rates. e Personalized ongoing consultations. Bob "Pie" Lee e R.R.S.P. lans available at prime, with deferred payments. Kim Mitchell e Appointments available Saturdays beginning Feb. 5th. CONTACT Bob "Pie" Lee & Kim Mitchell robertlee@aztec-net.com kim2@castlc.on.ca Robert Lee Insurance/M*Itowne Insurance Agency Ltd. îî Tel: 878-5786 Fax. 878-3692 Professional Liability Insured CALL FOR NO OBLIGATION11 CONFIDENTrIAL CONSULTATION www.robertleeinsurance.com 245 COMMERCIAL ST.