Frequently Asked Questions
Investing can get complicated. Hopefully the answers to these Frequently Asked Questions make it a little simpler. Just click on the questions of interest to you for the answers.
- What is a pooled fund?
- What is the difference between a pooled fund and a mutual fund?
- How does a mutual fund work?
- What are the benefits to mutual funds?
- How do I buy McLean Budden mutual funds?
- What is the minimum investment required?
- How can I redeem or switch to another McLean Budden mutual fund?
- Where do I call if I have specific questions regarding my account or statement?
- When are statements sent to clients?
- Are mutual funds risky?
- What items should I consider when investing?
- What is Asset Allocation?
- Why should I diversify?
- What is a management fee and what does it cover?
- How do I assess performance returns?
- What does the term “yield” refer to?
- What is a NAV?
- What does the term “load” refer to?
- Are there foreign content restrictions on my RRSP?
- How much can I contribute to my RRSP?
- Can I withdraw my money from an RRSP?
- What happens to my RRSP if I leave Canada and become a non-resident?
- What is a RRIF?
- What is a Locked-In RRSP/LIRA?
- What is a LIF?
- What is a LRIF?
A pooled fund is the grouping of investment savings that belong to many individuals who share the same investment goals. A pooled fund is typically invested by an investment management firm in a well-diversified portfolio of securities according to specific goals set out in the offering memorandum. Each investor, or unitholder, owns a share of the fund's total assets (represented by units). Investment earnings are generated when the securities held in the fund pay dividends or interest income. In addition, as the values of the securities in the fund rise or fall, each investor's 'unit price' or value will change as well. Pooled funds provide a number of benefits for investors including professional management, diversification, convenience and liquidity for easy access and withdrawal.
What is the difference between a pooled fund and a mutual fund?
Pooled funds and mutual funds are very similar in how they operate, with just a few aspects differentiating them. Pooled funds are typically available only to members of company group sponsored plans or high net worth individuals while mutual funds are available to both individual investors and members of group plans. Mutual funds are offered by prospectus only and as such you must receive a copy of the prospectus prior to investing. Pooled funds have a different registration status and therefore do not require a prospectus.
McLean Budden offers discretionary management services for a minimum portfolio size of $500,000 for mutual funds and $1,000,000 for pooled funds. McLean Budden mutual funds are also available through advisors and discount brokerages for a minimum investment of $10,000 per fund.
*The MB pooled funds are exempt from certain aspects of securities legislation. Please consult your investment advisor and/or legal counsel to determine if pooled funds are suitable for you.
When you invest in a mutual fund, you get a portion of the fund represented by units. The mutual fund company invests the money based on specific goals and procedures that it must state, by law, in a document called a simplified prospectus. The prospectus can be a bit intimidating because even if it is written in simple language, it may still be fairly complex. The main points to look for are these:
- The fund’s investment objective
- Any fees and expenses
- How to buy and sell your units
Most funds hold a number of investments at any given time. The holdings in a fund will differ depending on its objectives and the style of the fund manager. The act of buying and selling investments, changes in interest rates and economic trends influence the value of the individual investments in a fund’s portfolio and can cause the value of a fund to fluctuate daily. This means the value of your units in a fund can go up or down from day to day. Some fund prices will rise and fall more than others.
It’s important to understand the objectives of each fund so you can make sure you are investing in a fund that suits you. If you’re investing for the short term (for example, to buy a home), you probably want an investment that doesn’t fluctuate very much. If you’re investing for a bit longer (for a child’s post-secondary education, for example), you can tolerate some fluctuations in value. And, if you are investing for the long term (for your retirement), short-term fluctuations are not a problem. It’s all about matching your expectations and goals to those of the fund.
What are the benefits to mutual funds?
There are many, but here are some of the more notable benefits:
- Professional Managent
Mutual funds are managed by investment professionals who work in the field full time. - Transferability
As your investment goals change, you can transfer part or all of your investment from one fund to another to achieve different objectives. - Diversification
Diversification provides a way to reduce risk by holding a variety of investments. Mutual funds provide built-in diversification because a fund’s holdings are invested in a range of securities, asset classes and/or geographic regions depending on the fund. - Suitable for a wide range of investors
With more than 1,000 mutual funds in Canada, there’s a fund out there to meet virtually every need. - Liquidity
Mutual funds are easy and convenient to buy and sell. McLean Budden mutual funds are redeemable on any business day with the proceeds sent to you within a few business days. - Investor Protection
Investors in mutual funds are protected in several ways.
The assets of the fund are owned by the unitholders (or shareholders) of the fund and by law cannot be combined with assets owned by the manager of the fund. Nor can a manager use mutual fund assets for their own business purposes.
The assets themselves are held by a custodian - generally a chartered bank or trust company - and are protected by rigorous
Canadian banking and trust company legislation. Among other things, this legislation requires that mutual fund assets be kept separate from the assets of the trust company or bank.
Moreover, each fund has an independent auditor who reports to the fund's trustee(s) or directors. The auditor reviews the practices of the fund and its manager, such as unit pricing, compliance with acceptable accounting practices and purchase and redemption requirements.
How do I buy McLean Budden mutual funds?
McLean Budden offers discretionary portfolio management services for portfolios with a minimum of $500,000. McLean Budden mutual funds are also available through discount brokers and investment advisors.
What is the minimum investment required?
For clients investing directly with McLean Budden, the minimum portfolio size is $500,000. If purchased through a broker, the minimum required investment in each McLean Budden mutual fund is $10,000 per fund. Subsequent purchases for the same fund must be a minimum amount of $100. Pre-Authorized Chequing or PACs ($100 per month minimum) and Automatic Withdrawals are available.
How can I redeem or switch to another McLean Budden mutual fund?
If the funds were originally purchased directly from McLean Budden, you may request a redemption or switch by providing a signed written request listing the account registration name, account number, fund names, dollar or unit amounts and transaction details to:
McLean Budden Limited
145 King Street West
Suite 2525
Toronto, ON
M5H 1J8
Attention: Mutual Fund Department
For funds originally purchases through McLean Budden fund transfers may be requested via fax +1 416 862 9624, with the original direction placed in the mail.
If you are redeeming a fund and wish to have the proceeds deposited directly to your bank account, please include your bank information and attach a void cheque. If no void cheque is provided, a cheque payable to the registered unitholder(s) will be mailed to the address on file. The transaction request must be signed by the registered unitholder.
Where do I call if I have specific questions regarding my account or statement?
If you are a direct client of McLean Budden the mutual fund client services team is available to address any administrative concerns regarding your account. You can reach them by telephone at 1 800 884 0436 or in Toronto at +1 416 862 9800 or by visiting here.
When are statements sent to direct clients?
Quarterly statements are mailed out approximately 15 business days following each quarter-end (March 31, June 30, September 30, and December 31). Included in the mailing is a Quarterly Report. Confirmation Notices for transactions are sent out the day following a transaction.
It's impossible to compare funds “across the board”. Mutual funds not only differ in their investment objectives but also invest in different kinds of securities that reflect the ultimate objective of the fund. Thus, depending on the securities the fund is investing in, or the mix of securities chosen for a specific fund, the level of 'risk' varies substantially.
For example, a fund seeking the highest possible return on capital may include investments in more speculative common stocks than one seeking maximum income from dividends. The risk in the first objective is much higher than in the second. You can see, therefore, that the amount of risk involved is directly related to the fund's objective. Generally speaking, it can be assumed that the higher the return expectation, the higher the risk involved.
However, mutual funds remove much of the risk from investing because they are managed by professionals with many years experience in portfolio management. For example, in common stock funds, professional managers select the investments and monitor them carefully and constantly.
What items should I consider when investing?
When considering your investment options, many factors should be taken into account. These factors include investment horizon, risk tolerance, overall savings portfolio and retirement income needs. Let's take a look at some of these items.
Investment Horizon - Generally the longer your investment horizon (the amount of time before you will actually need to cash in or convert your investments into some type of retirement income) the more aggressive you can be with your investment choices. If investing in a stock market based fund such as an Equity Fund, you should have a minimum investment horizon of one business cycle (business cycles typically last 2-7 years). This would allow you sufficient time to wait for the market to recover should there be a downturn.
Risk Tolerance - Your risk tolerance is your comfort level with fluctuations in the value of your investments. If you are uncomfortable with large changes in the value of your investments you may want to consider investment options that have a history of low volatility. Over time, investments with lower volatility (lower risk) have typically provided lower returns; investments with higher volatility have historically provided higher returns.
Savings Portfolio - You should consider your overall savings portfolio whenever you are looking at a specific investment. Investment decisions should not be made in isolation. Look at each investment to see how it fits into your overall savings plan. If you have other assets or savings that are invested conservatively you may want to look at more aggressive options for any future investments. This would allow you to balance your overall portfolio.
Retirement Income Needs - The amount of income you will need in retirement should also form part of your investment decision. Retirement savings are determined by the amount of money you save and the investment returns you generate. To increase your retirement savings you will need to either put more money away and/or generate higher returns.
Asset allocation refers to diversifying your investments among the basic asset classes – money market, bonds and equities. The amount you allocate to each asset class should depend on factors unique to your own circumstances.
Allocating all of your savings into a single asset class exposes you to undue risk, especially if your one and only investment doesn't perform to your expectations. Not all investments perform the same in all economic conditions. During some periods bonds outperform stocks and at other times stocks will outperform bonds. By spreading your investments among the major asset classes you will minimize your overall risk while providing an opportunity for growth.
You can diversify your investments by investing in a range of funds that focus on a particular asset class such as stocks or bonds and further diversify by investing in funds that focus on geographic areas.
What is a management fee and what does it cover?
A management fee is the amount a fund company charges for managing a mutual fund. McLean Budden's management fee is all-inclusive and covers all administration costs that are required to operate the funds.
How do I assess performance returns?
There are several factors that you should keep in mind when analyzing performance results. You should look at both Annual and Annualized returns over a minimum of five years and you should compare returns to the overall market as represented by a market index.
Annual or year-over-year returns will provide you with an indication of the volatility or risk associated with a fund. A less volatile fund will have consistent results with returns falling within a narrower range around market returns. A higher risk or more volatile fund will have returns with a greater range of results from year to year.
Annualized (average annual) returns provide you with an indication of the long-term performance of a fund. Keep in mind however that past performance does not necessarily indicate future performance. Also one very good year can have a large impact on the long-term results and could hide years where performance may have lagged.
Relative performance is also an important consideration. You should compare investment results to the overall market and how they stacked up against a related benchmark. For example, if you are investing in a Canadian Equity Fund you should compare the returns to an index such as the S&P/TSX Composite Index. This will tell you whether the fund you are investing in has outperformed or underperformed the overall market in which it invests.
What does the term “yield” refer to?
In general, yield is the return, excluding capital gains, you get on your original investment. In the case of a money market mutual fund, it is the amount of income the fund makes, shown as a percentage of the current unit price. In the case of bonds, it is the interest rate you would earn if you were buying the bond at its current price and holding it to maturity.
A NAV(Net Asset Value) is the price at which units of a mutual fund are purchased or redeemed, and represents the total net asset value of the fund divided by the number of units or shares of the fund outstanding.
What does the term “load” refer to?
Load refers to sales charge paid by investors when mutual fund units are bought (front-end load) or redeemed (back-end load) through licensed mutual fund dealers.
Are there foreign content restrictions on my RRSP?
There are no foreign content limits on RRSP accounts.
How much can I contribute to my RRSP?
Your maximum annual RRSP contribution is 18 per cent of your earned income for the preceding year. (This excludes investment, pension, and other sources of income) up to certain maximums set out by the government:
$20,000 - 2008
$21,000 - 2009
$22,000 - 2010
Beyond 2010 the contribution limit is indexed to rise in step with average annual wage increases. If you contribute to a Registered Pension Plan (RPP), Money Purchase Pension Plan (MPPP), or Deferred Profit Sharing Plan (DPSP), your RRSP limit may be lower.
Can I withdraw my money from an RRSP?
If you plan to make a partial or full withdrawal from your RRSP, be aware of the tax consequences. All financial institutions are required by Canada Revenue Agency to charge applicable withholding taxes for all portions of the monies withdrawn from the RRSP.
The withholding tax rates for RRSP/RRIF withdrawals are listed below:*
| Amount | All Provinces Excluding Quebec | Quebec Residents | ||
| Federal | Quebec | Total | ||
| Up to $5,000 | 10% | 5% | 16% | 21% |
| $5000.01-$15,000 | 20% | 10% | 16% | 26% |
| $15,000.01 and above | 30% | 15% | 16% | 31% |
*There is no withholding tax applied to RRIF minimum amounts, as long as there are no withdrawals made in the first year after set-up.
What happens to my RRSP if I leave Canada and become a non-resident?
If you leave the country and become a non-resident, you can leave your RRSP in place, but you will not be eligible to make further contributions unless you have earned income in Canada. Canada Revenue Agency’s Pension and RRSP Tax Guide explains how to calculate earned income if you are a non-resident. If you become a resident of the U.S., amounts earned by your RRSP investments after you leave the country may be subject to U.S. income tax. If you decide to cash in your RRSP after you have become a resident of another country, up to 25 per cent of the proceeds will be withheld in Canada.
A Registered Retirement Income Fund (RRIF) is similar to an RRSP except that you cannot make contributions, and you are required to withdraw a minimum amount each year. The minimum is established by Canada Revenue Agency and based on your age and the RRIF’s market value as of December 31.
What is a Locked-In RRSP/LIRA?
If you leave a workplace that has a pension plan before you reach retirement age and the terms of your pension allow it, you may be able to transfer your accumulated pension benefits into a locked-in account. The funds can then be invested in the same way as you would invest an RRSP, except with a number of other restrictions. Since funds in a locked-in RRSP come from a workplace pension plan, locked-in accounts are regulated by pension legislation, which determines the terms and conditions of these plans. To minimize confusion surrounding a regular RRSP and a locked-in account, locked-in RRSPs are now generally referred to as Locked-In Retirement Accounts (LIRAs). Pension legislation requires the funds in a locked-in RRSP or LIRA be used to provide a lifetime income for the holder. That means you cannot make a lump sum withdrawal from a locked-in plan, nor can you cash it in at any time.
When your Locked-In Retirement Account (LIRA) matures, you have the option of converting it to a Life Income Fund (LIF). This operates in the same way as a RRIF, except there is both a minimum and maximum annual withdrawal amount. The minimum withdrawal is based on the minimum withdrawal for a RRIF, while the maximum is set by the pension regulatory authority. The objective is to make sure your LIF provides you with an income for the rest of your life. In most jurisdictions, a LIF must be converted to an annuity by the end of the year in which you turn 80.
A Locked-in Retirement Income Fund (LRIF) is an alternative to a LIF, which can be used when your LIRA matures. It operates like a LIF, except that it does not have to be converted to an annuity at any point.
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