{"id":1240,"date":"2021-07-20T20:13:22","date_gmt":"2021-07-20T20:13:22","guid":{"rendered":"https:\/\/www.nerdwallet.com\/ca\/?page_id=1240"},"modified":"2023-06-19T06:10:48","modified_gmt":"2023-06-19T13:10:48","slug":"what-are-mutual-funds-in-canada","status":"publish","type":"page","link":"https:\/\/www.nerdwallet.com\/ca\/investing\/what-are-mutual-funds-in-canada","title":{"rendered":"What Are Mutual Funds in Canada?"},"content":{"rendered":"\n

Anyone who wants to start investing will likely come across mutual funds right away. Mutual funds are one of the most popular investment products, and they can help you meet your goals, including retirement or your child\u2019s continuing education costs. However, before you start investing in mutual funds, you need to understand how they work and if they\u2019re a good fit for you.<\/p>\n\n\n\n

What are mutual funds in Canada?<\/h2>\n\n\n\n

Mutual funds in Canada are investment products that invest in stocks, bonds, cash and even other funds. The money you invest into mutual funds is pooled with money from other investors and is managed by a professional money manager. As more investors buy into the fund, additional units or shares are issued.<\/p>\n\n\n\n

Mutual funds are appealing since they allow anyone to invest. Because your money is being managed by a professional, there\u2019s no need to worry about your portfolio on a daily basis. Also, since mutual funds invest in multiple products, you won\u2019t have all your eggs in one basket \u2014 you\u2019ll be diversified, which can help minimize risk.<\/p>\n\n\n\n

There are thousands of mutual funds available, but each one has a specific focus. For example, one fund may focus on growth, while another may prioritize fixed-income investments<\/a>. Mutual funds can also be global, with some giving you access to markets all over the world. Alternatively, some funds invest in specific countries. Regardless of your goals, there\u2019s likely a mutual fund available to help you get there.<\/p>\n\n\n\n

Types of mutual funds<\/h2>\n\n\n\n

Even though there are thousands of mutual funds out there, they typically fall into one of three main categories:<\/p>\n\n\n\n

Fixed-income funds<\/h3>\n\n\n\n

Fixed-income funds focus on investment products that are low risk, such as bonds, term deposits<\/a>, Treasury Bills<\/a> and money market funds. You\u2019ll get consistent income with these funds, but the yields likely won\u2019t be very high.<\/p>\n\n\n\n

Equity funds<\/h3>\n\n\n\n

Equity funds are designed for growth, so they typically invest in stocks. You have a greater chance of higher returns with equity funds, but there\u2019s also more volatility. Different equity funds are available depending on your goals, such as growth stocks, large-cap stocks, etc.<\/p>\n\n\n\n

Balanced funds<\/h3>\n\n\n\n

Balanced funds combine equities and fixed-income securities into a single fund. These types of mutual funds are popular because you can pick one based on your risk tolerance. Conservative funds have more fixed-income assets, while aggressive funds will be heavier on equities.<\/p>\n\n\n\n

Purchasing mutual funds is easy since just about every financial institution and investment firm offers them. What\u2019s nice about mutual funds is that you can hold them in taxable and non-taxable accounts, such as your Tax-Free Savings Account (TFSA)<\/a>, Registered Retirement Savings Account (RRSP)<\/a>, trading account and more.<\/p>\n\n\n\n

\u00bb MORE:<\/strong> How to compare TFSAs and RRSPs<\/a><\/p>\n\n\n\n

Pros and cons of mutual funds<\/h2>\n\n\n\n

There\u2019s no denying the popularity of mutual funds. However, it\u2019s important to understand the pros and cons before you start investing in them.<\/p>\n\n\n\n

Pros of mutual funds<\/h3>\n\n\n\n