The next step involves selecting a personalized investment mix that corresponds to your strategic asset allocation. However, before you do so, you should familiarize yourself with the different investment fund options available to you. Guaranteed Funds Your deposit can be directed into a choice of Guaranteed Funds. The most basic option is the Daily Interest Accumulator (DIA), which is like a savings account. It is recommended as a temporary holding account - a safe place to park money for a short time - not a long-term investment. Money in the DIA is completely liquid and can be invested in other funds at any time. The Compound Interest Accumulator (CIA) is a secure term investment similar to a Guaranteed Investment Certificate with a bank or trust company. You can pick from different terms, allowing you to mix varying maturities. At maturity, the accumulated principal and interest is reinvested according to your instructions. Non-guaranteed Funds Non-guaranteed or market-related funds are those that are tied to the performance of the financial market. Fixed Income, Balanced (also known as Diversified funds), as well as Equity funds fall into this category. Fixed Income Funds For security-oriented investors, Fixed Income Funds are managed primarily to provide good interest returns with lower risk or volatility. They derive their earnings primarily from investments providing interest income. They also give you an opportunity to enjoy higher returns during periods when current interest rates are dropping. Conversely, when interest rates are rising, returns may be reduced. The Money Market Fund invests in short-term debt securities maturing in one year or less. These include Treasury Bills, Bankers' Acceptances, commercial paper and Guaranteed Investment Certificates. The Mortgage Fund invests in commercial and industrial mortgages, diversified by type and location. While less liquid than many other "fixed income" funds, it offers superior long-term returns. The Bond Fund invests in debt securities issued by a government or a company. You receive regular interest payments while you hold the bond, and the face value when it matures. Short-term bonds mature in less than one year; medium-term bonds mature in two to 10 years; long-term bonds mature in more than 10 years.
Equity Funds Equity Funds offer the potential to make your nest egg grow bigger than Guaranteed or Fixed Income Funds over the long-term. The investment management teams that oversee these funds have an excellent record of consistent performance. Equity Funds allow investors to participate in stock market oriented investments. Balanced Funds Balanced Funds, also known as Diversified Funds, invest in a mix of stocks, bonds and short-term investments and the percentage held in each area is adjusted depending on current market conditions. Foreign Funds Investing a portion of your monies in foreign funds helps to further diversify your portfolio.
So what's the best choice of investment funds for you? One thing to consider is how much risk you are willing to take with your investments - the greater the risk means the greater the potential for the rate of return or value to fluctuate. As a general rule, the higher the potential for long-term returns, the higher the risk or fluctuation of that potential return.
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