The term mutual on its own is defined as “of or pertaining to each of two or more”, “held in common”, “shared” or “mutual interests”. In the investment world the word mutual is most commonly associated with a kind investment known as a mutual fund.

The definition of mutual fund would be a pool of capital drawn from multiple individuals that is managed by a professional with a somewhat specified investment mandate. In simple terms you, and a whole bunch of other people, give your money to a manager and that manager invests the money, charges you a fee and hopefully gives you a positive return.

Now that we have that understood what are all the other vehicles out there that seem similar to mutual a fund? There are separately managed accounts, pooled funds, discretionary accounts, institutional managers and investment councilors just to name a few.

A pooled fund is pretty much a mutual fund with some form of minimum investment amount (i.e.: $50,000) and typically lower fees. A separately managed account is where you, rather than owning shares in a fund, hold the individual securities personally. If a fund owns BCE you would hold shares of the stock directly in your account. The advantage of this is that if you decide to move managers you can take the individual securities with you without triggering capital gains taxation. In some cases the fees are tax deductible as well.

Discretionary trading is where your advisor builds an individual portfolio of securities for you with your input. You own the stocks directly as with a discretionary account. Most likely they follow the research produced by their firms to select these securities.

Institutional managers and investment councilors are, for the most part, managers that either put you into pools or discretionary accounts with much higher minimums (i.e.: $500,000). They tend to have lower fees and tax efficiency as well.

Now that we have covered all this what is the underlying message? The message is that no matter what you call it all of these are mutual funds in one way or another. Unless you or your advisor actually go out and research the stocks and make the selections it’s a mutual fund in nature.

I have a simple view that I am smart enough to know what I know, smart enough to know what I don’t know and smart enough to find really smart people to do what I don’t know. That being said our office does not build portfolios comprised of individual stocks, we use our skills to find the best in class to manage mandates that fit into our client portfolios.

These groups, with their specialized skill sets, spend all of their time and energy living in the realm that they invest it. That usually leads to better performance. If you do your homework you can also get these solutions with reasonable fee and tax efficiency as well.

Les Consenheim is a financial adviser with Raymond James Ltd - Independent Financial Services and can be reached at 250-372-8117 or les.consenheim@raymondjames.ca">les.consenheim@raymondjames.ca. Raymond James Ltd. is a Member - Canadian Investor Protection Fund.