Information Centre

An investment fund is a financial product you can invest in with other investors who have the same objectives as you.

The pooled assets you all contribute together are assigned to a portfolio manager, who works to grow them.

Based on the investment fund’s policy, the portfolio manager selects high-quality securities in which to invest fund assets.

There are several types of funds. Some focus on one asset class or market, while others are broadly diversified:

• Fixed-income funds: bonds, treasury bills, etc.
• Growth funds: Canadian or foreign common stock
• Balanced funds: a combination of fixed-income securities and growth securities

These funds differ from each other in their return potential and degree of risk.

Fixed-income funds present low to moderate risk, but the return they generate is rather limited.

On the other hand, growth funds can yield high returns, but are usually more volatile.

Some funds are broadly diversified, while others focus on one asset class or one sector in particular. While the possibilities number in the hundreds, every fund falls into one of the three main categories.

When you invest in an investment fund, you acquire units in the fund.

From your investment, you can expect a return made up of two components:

• Capital appreciation: Your units increase in value over time. When you sell them, you may make a capital gain. The gain is the difference between the initial purchase price and the price you obtain when you sell. The reverse is also true – when you sell units at a lower price than bought them for, you take a loss.
• Income distribution: On occasion, investment funds distribute a portion of their income (interest, dividends or other) to the unit holders. These amounts may be paid in cash or reinvested as additional units.

To choose the investment fund that suits you best, you have to determine your investor profile.

It’s easy. You only have to answer a few questions:

• Your objective: What are your reasons for investing? Saving up for retirement, to buy a house or to finance a child’s education, for instance.
• Your investment horizon: Are you investing for the short, medium or long term? When will you need to draw on your capital?
• Your risk tolerance: How will you react to market fluctuations? Can you accept sudden and significant ups and downs?

There are financial products for all investor profiles, from the most conservative to the most aggressive.

Don’t be shy to ask your representative to help you make the right choice for you.

Diversifying means spreading your investment across several asset classes. The main ones are:

• Cash
• Fixed-income securities (bonds, for example)
• Growth securities (such as common stock)

These asset classes do not share the same characteristics for volatility and return potential.

No expert can predict with certainty which class will produce the best results in the months to come.

That’s why the best possible portfolio is one that has exposure to all markets using the principle of portfolio diversification at all times. Diversification reduces portfolio volatility while allowing investors to benefit from rising markets.

Portfolio managers allocate the amounts invested in investment funds strategically across the main asset classes. The relative importance of each asset class in an investment fund is based on the investment fund’s objective and strategy.

Asset class	Description	Examples
Liquid assets (or Cash)	Short-term debt Very low risk	Treasury bills Short term bonds
Fixed-income securities	Medium and long term debt securities Objective: Steady interest or dividend income Low or medium risk	Bonds Mortgage-backed securities Preferred shares
Growth securities	Equity interests in stock market-listed companies Objective: Long-term growth Return linked to changes in the stock market Higher risk	Canadian, U.S. and global equities Small and large cap equities

Before you invest, you should determine your investor profile. Your profile will determine the optimum asset allocation for you to attain your investment objective.

Rebalancing by the portfolio manager adjusts your portfolio, which deviates naturally over time, so that it remains on target to the allocation and degree of risk that match your profile

Rebalancing reduces risk and increases the return potential of your portfolio.

In the long-term, this rebalancing can yield substantial gains.

Compare the changes in asset allocation of two portfolios.

• Without rebalancing, the asset classes in the first portfolio drift unchecked.
• Regular rebalancing of the second portfolio maintains the initial allocation

Data from 1990 to 1999 by the FTSE TMX Universe, MSCI World Total Return, in Canadian dollars

In an effort to provide you with personalized service, we are calculating your Desjardins Funds investment rate of return for you. This information appears on your investment statement.

For more information about the calculation, please read Understand your personal rate of return.

Fees? What fees?

It is a common practice in the industry. All investment funds charge fees.

Some are incurred when you carry out a transaction: purchase, sale, transfer, assignment or other.

Other fees are collected for as long as you keep your units in the funds. They cover the costs of managing the fund in particular.

What are Management Expense Ratios?

The Management Expense Ratio (MER) is the total of annual expenses required for the operation of the Fund.

It is expressed as a percentage of total assets. Practically speaking, it usually amounts to 1 to 3%, which reduces the performance of the fund.

The MER varies according to the type of product: for instance, a bond fund usually costs less than an equity fund, which requires greater expertise in stock selection.

MANAGEMENT FEE REBATE

As a Desjardins member, you are entitled to a management fee rebate when you invest in the Chorus II, Melodia and SocieTerra Portfolios, more details

What are the MER components?

The ratio is made up of 3 major expense items.

• Management Fees

  These are used to pay the fund manager’s and portfolio manager’s compensation as well as the trailing commission paid, as the case may be, to your brokerage firm and your investment representative.

• Fixed Administration Fees

  These include legal and accounting fees, custodian fees, fees for bookkeeping and other common expenses.

• Other operating expenses

  These encompass applicable taxes, borrowing expenses, as well as fees incurred to secure outside services, among others.

What is a trailing commission?

A trailing commission is the compensation for the advice you receive.

The manager of the Desjardins Funds (Desjardins Investments Inc.) pays this fee each year to the firm you use for the purchase of funds (your Caisse Desjardins, for instance).

Your Caisse Desjardins can then allocate part of the amount to your representative.

Trailing commissions are included in the management expense ratio of the Fund.

What Are Desjardins Funds’ sales charges?

Fees may be applicable to your purchase or sale of units.

• Front-End Load

  As a Desjardins member, you pay no front-end load when you purchase Desjardins Funds units. When you sell your Fund units within 90 business days from the date of their purchase, short-term transaction fees may be payable.

• Back-End Load

  As a Desjardins member, you pay no back-end load when you sell Desjardins Funds units.

Information about management fees and other charges related to mutual funds is included in the prospectus, the Fund Facts documents, and the Investing in Mutual Funds brochure (PDF, 2.65 MB).