A family of funds is a group of different kinds of mutual funds managed by the same company. Many firms that sell mutual funds offer more than one family of funds, managed by different companies. A family of funds can include:
- Bond funds
- Money market funds
- Balanced funds
- Equity funds (also known as stock funds)
The fund management company hopes investors will buy all the funds they want from their family alone.
Why would I choose to invest in a fund family?
You may find a fund family whose approach and performance you really like. If, over time, you find that you want to switch from one type of fund to another in the same family, it's easy. And, there is often no fee.
Tip: Mutual fund companies often build relationships with advisers and encourage them to sell their funds. When you are choosing your adviser, find out if they focus on the funds of a certain company or a certain family of funds.
Why would I buy funds from different families?
Different fund families have different managers or management teams. So, they can have very different styles for investing. Choosing different funds means that you are diversifying not just the types of investments you choose, but the style of investing as well. It's another way to reduce your investment risk.
Examples: A fund manager for one company might have a top-down approach. This means they look at the big economic picture, and then find industries or countries that look like they are going to do well. Another company's manager might have a bottom-up approach that looks at how well individual businesses are doing, no matter what the outlook is for their industry or the economy. A third management team may blend these two approaches.
Tip: As an investor, you should compare the funds offered by each fund family and decide what is best for you. If you want to mix it up, make sure you get funds from different companies. Just be careful: funds can have quite different names and still be funds of the same company.
Remember: Mutual funds are all about diversifying
You can mix up the types of funds you buy as well as the brand of funds. Choose an adviser who can help you get the mix of mutual funds that fits your goals, your time horizon and your tolerance for risk.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.