Mutual funds are investment companies which combine the capital of many investors in order to purchase stocks and bonds. They provide both expert investment management and a diversification of investments that the individual investor could not afford.

Mutual funds are an ideal method of saving for the long term if you are willing to take a risk. They guarantee nothing. Your money may earn a rate of return far higher than that supplied by any other saving facility. You may, on the other hand, only get out what you put in, or less. In the past, their performance has been spectacular. But what of the future? This vexing question will be discussed in greater detail in the chapters devoted to mutual funds.

It is probably true to say that all mutual funds in Canada are safe, in the sense that their management will not abscond with your money. The funds are a convenient form of investing, in that monthly purchase plans are available, though some of the plans are expensive. The past performance of some mutual funds has been magnificent, and there is a great variety of funds available to suit individual investment taste. The choice of a fund can be time-consuming, but it is worth spending some time on the decision as need be made only once.

The mutual funds should be used for long term saving by someone willing to take a risk in return for the possibility of greater profits. It would be an ideal saving facility for someone with a guaranteed pension plan from his employer and a sound insurance program as well. If the mutual funds did not work out as well as planned, he would still have quite a bit to fall back on. Individuals with moderate income and little insurance should think hard before any decision to invest money in mutual funds.