A mutual fund is an investment vehicle where money collected from various investors is pooled together for the purpose of investing in different assets including stocks, bonds, money market investments like cash, gold, etc. These investments are all selected by a professional investment manager.

Generally, by investing in a number of different assets, a mutual fund can lower your risk because your money is not dependent on the performance of a single investment.

Money market funds invest primarily in treasury bills and other high quality, low risk short-term investments. These types of funds help to provide stability and minimize risk, while delivering returns in the form of regular monthly distributions that are typically better than those of a traditional bank account. Investors may choose money market funds for their portfolio as a solution to help meet short-term goals or access funds in case of emergency.

By investing in fixed income securities such as mortgages, bonds and preferred shares, fixed income funds offer regular cash flow while preserving capital. These funds typically distribute interest income and provide potential for capital gains. Fixed income funds may also be used as a way to diversify an investment portfolio.

Our experienced fixed income team comprises over 80 fixed income investment professionals who collaborate closely to uncover true value and deliver optimal risk-adjusted returns, even in a period of low yields. The team continuously refines its approach and evolves its broad suite of solutions to help meet the changing needs of investors.

Balanced funds hold a combination of equities, fixed income and money market investments. The portfolio manager adjusts the asset mix based on the objective of the fund and their view of the economy. Investors receive distributions in the form of interest, dividends and capital gains.

TDAM was among the first to introduce asset allocation portfolios. These “all-in-one” solutions are actively managed by our highly experienced investment team. The portfolios spread your capital among various asset classes, and then various types of investments within these asset classes. This way you can get the benefits of diversification—capturing the market’s upside while limiting the downside. There’s a broad selection to help meet your needs, whether your objective is retirement income, aggressive growth, or somewhere in between.

Equity funds invest in the stocks of public companies. These companies range in size from large to small, or both, and can be located in Canada only, the United States only, other specific countries or all countries. Equity funds may also focus on companies in certain sectors such as energy, gold or financials. These funds are ideal for investors looking for potential growth over the long term.

When it comes to the equity component of a diversified portfolio, we believe in owning high quality companies with solid balance sheets and strong financial performance. This focus on quality is what helps our clients confidently pursue their goals for growth. Additionally, TDAM solutions are collectively managed by an experienced equities team comprised of over 70 equity investment professionals with diverse backgrounds and skillsets. This approach consistently adds value to your needs.

Diversifying across a number of asset classes and geographic regions gives your investment portfolio a built-in ability to potentially benefit from each year's top performers, while seeking to reduce overall portfolio risk.

Diversification — the idea of not putting all of your eggs in one basket — works because asset classes have different qualities and tend to react to economic events in different ways. With a broad range of investments, chances are that when one area of your portfolio is falling in value, another may be rising.

As an example, following the steep and rapid market declines that occurred in the wake of the COVID-19 pandemic, most major asset classes achieved positive returns in 2020 and many indices went on to achieve all-time highs -giving credence to the stay-invested-for-the-long-term philosophy. Many investors could have recovered a majority of their 2020 losses in a relatively short period of time if they waited and remained invested in a diversified portfolio of equities and fixed income assets.

Moving in and out of the stock market — trying to predict the highs and lows —may cause you to miss out on potential long-term growth. History shows that investors who remain invested during the bear markets or challenging times, go on to benefit from the recovery period and the next bull market.

So what if you missed the top 1% of the best days over the last 30 years?

Find out learn more about The Power of Staying Invested.

Changes in the market are common. While no one can predict when volatility may strike, markets have historically bounced back over the long-term. For retirees, however, periods of high volatility can affect their savings if the sequence of returns they earn is unfavourable.

As you review your own approach to retirement, it’s important to understand the two stages—accumulation and decumulation—and how to improve your chances of maintaining your money.

Accumulation is the period where an investor saves and grows their nest egg. As they approach or reach retirement, an investor starts living off that nest egg during the decumulation phase. So while the accumulation phase is all about savings and returns, the decumulation phase is more about generating sustainable income. In short, it's a pivot to generating cash flow to avoid running out of money. And with the prospect of a long retirement, you might still need some growth in your portfolio.

An investor who does not have an immediate need for income can afford to wait out volatility, but a retiree who is in a decumulation phase – for example, a person who needs to make regular withdrawals – may experience a significant impact on their portfolios.

Here's an example. If a retiree is withdrawing 5 per cent of their savings per year, then their asset base will likely decline over time (depending on overall returns). So returns earned at the start of an investor's decumulation phase can affect a greater number of assets, setting the stage for the portfolio’s future income flow. On the other hand, the effects of investment returns in later stages of decumulation are not as pronounced, as they impact a smaller amount of assets. In short, avoiding negative returns early in retirement can be critical.

For more information, and to help ensure your investment plan will meet your retirement needs, have a conversation with your advisor.