how to invest mutual fund in canada

Investing in mutual funds in Canada follows a systematic process. Here is a step-by-step instruction sheet to get you going:

1. Understand Mutual Funds:

Before you start investing, make sure you understand what mutual funds are. A mutual fund is a pool of money collected from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. They are managed by professionals, providing investors with a way to access a diversified investment portfolio without directly buying individual stocks or bonds.

2. Set Your Investment Goals:

Determine your investment objectives, risk tolerance, and time horizon. Are you investing for retirement, saving for a specific goal, or seeking to grow your wealth? Your goals will help you choose the right mutual funds for your needs.

3. Research and Select Funds:

Research different mutual fund options available in Canada. Look for investment funds that fit your risk tolerance and investing objectives. Mutual funds can be categorized into equity (stocks), fixed income (bonds), balanced, and specialty funds. Read the fund's prospectus, which provides essential information about the fund's objectives, fees, historical performance, and risk factors.

4. Choose Between Different Fund Types:

In Canada, you can invest in mutual funds through various account types:

- Registered Retirement Savings Plan (RRSP): Offers tax advantages for retirement savings.

- Tax-Free Savings Account (TFSA): Provides tax-free growth on your investments.

- Non-Registered Account: An ordinary investment account with no special tax advantages.

5. Select an Investment Platform:

Choose a financial institution, such as a bank, credit union, or investment brokerage, that offers access to mutual funds. You can also consider robo-advisors, which offer automated investment services based on your risk profile and goals.

1. Questrade

2. TD Direct Investing

3. RBC Direct Investing

4. National Bank Direct Brokerage

5. Scotia iTRADE

6. Complete Account Opening:

Open the chosen investment account. This may involve providing personal information, identification, and signing necessary documents.

7. Fund Your Account:

Deposit funds into your chosen investment account. Depending on the platform, you can contribute a lump sum or set up regular contributions.

8. Purchase Mutual Funds:

Once your account is funded, you can start investing. Choose the mutual funds you've researched and place your investment orders through your chosen platform. You'll need to provide the fund name, ticker symbol, and investment amount.

9. Monitor and Review:

Investing in mutual funds is a long-term endeavor. Monitor the performance of your investments regularly, but avoid making impulsive decisions based on short-term fluctuations. Review your portfolio periodically to ensure it remains aligned with your goals.

10. Stay Informed:

Keep educating yourself about investing, financial markets, and economic trends. This knowledge will help you make informed decisions and adjust your portfolio as needed.

11. Seek Professional Advice:

If you're unsure about which funds to choose or need personalized advice, consider consulting a financial advisor. A professional can provide guidance based on your individual financial situation and goals.

Top 5 Mutual Funds in Canada

1. Scotia Canadian Equity Fund AUM ($341M)

2. Mackenzie Canadian Equity Fund AUM ($519M)

3. Canadian Equity Income Fund AUM ($3.2B)

4. Invesco Select Balanced Fund F Series AUM ($548.3M)

5. NBI Global Equity Fund AUM ($1.9B)

Top 10 mutual funds in Canada

1. Vanguard FTSE Canada All Cap Index ETF (VCN)

2. Vanguard Total Bond Index ETF (VBU)

3. iShares Core S&P 500 Index ETF (CAD) (IVV)

4. Vanguard FTSE Developed Markets Index ETF (VEA)

5. iShares Core MSCI Emerging Markets IMI Index ETF (CAD) (XEF)

6. BMO Canadian Dividend ETF (ZDV)

7. Vanguard Canadian Balanced Index Fund (VBAL)

8. TD Canadian Bond Index Fund (TDB900)

9. iShares Core Canadian Universe Bond Index ETF (XBB)

10. Brookfield Canadian Equity Income Fund (BEI)

FAQ

What are mutual funds?

Mutual funds are a type of investment vehicle that pools money from many investors and invests it in a variety of assets, such as stocks, bonds, and money market instruments. Mutual funds are professionally managed, which means that a team of experts is responsible for selecting the investments and making investment decisions. This can be a great way for investors to get started in the market, as they don't have to worry about picking individual stocks or bonds.

How do mutual funds work?

When you invest in a mutual fund, you are essentially buying shares in the fund. The fund manager then uses this money to purchase the underlying assets, such as stocks, bonds, and money market instruments. The value of your shares will go up and down depending on the performance of the underlying assets. You can sell your shares back to the fund at any time, but you may not get back the same amount of money that you invested, as the value of the fund can go down as well as up.

What are the different types of mutual funds?

There are many different types of mutual funds available, each with its own investment objective and risk profile. Some of the most common types of mutual funds include:

Equity funds: These funds invest in stocks, which are shares of ownership in companies. Equity funds can be either growth funds, which focus on investing in companies that are expected to grow rapidly, or income funds, which focus on investing in companies that pay high dividends.

Bond funds: These funds invest in bonds, which are loans that are issued by governments or corporations. Bond funds can be either short-term funds, which invest in bonds that mature in less than five years, or long-term funds, which invest in bonds that mature in more than five years.

Money market funds: These funds invest in short-term, low-risk investments, such as treasury bills and commercial paper. Money market funds are a good option for investors who want to keep their money safe and earn a small return.

What are the dangers of buying mutual funds?

There are always risks associated with investing, and mutual funds are no exception. Some of the risks of investing in mutual funds include:

Market risk: The value of your mutual fund shares can go down as well as up, depending on the performance of the underlying assets.

Management risk: The performance of your mutual fund will depend on the skill of the fund manager. If the fund manager makes poor investment decisions, the value of your shares could decline.

Liquidity risk: It can be difficult to sell your mutual fund shares quickly, especially if the market is volatile.

Tax risk: Mutual funds are subject to taxes on capital gains and dividends.

How do I choose the right mutual fund for me?

There are a few things to consider when choosing a mutual fund:

Your investment goals: What are you saving for? Do you need your money in the short term or the long term?

Your level of comfort with risk: How much danger are you willing to take? Mutual funds with higher risk potential have the potential to earn higher returns, but they also have the potential to lose more money.

Your time horizon: How long do you have until you need your money? Mutual funds with shorter time horizons are typically more conservative, while mutual funds with longer time horizons can be more aggressive.

Your investment fees: Mutual funds charge fees for management and administration. It's important to compare the fees of different mutual funds before you invest.

What are the fees associated with mutual funds?

Various fees are assessed by mutual funds, such as:

Management fees: These fees are paid to the fund manager for managing the fund.

Distribution fees: These fees are paid to the fund company for distributing the fund's shares to investors.

Redemption fees: These fees are charged when you sell your shares in the fund.

Load fees: These fees are charged when you buy your shares in the fund.

It's important to understand the fees associated with any mutual fund before you invest.

How can I buy and sell mutual funds?

Mutual funds can be bought and sold using a brokerage account. You can also buy and sell mutual funds directly from the fund company. When you buy a mutual fund, you will be buying shares in the fund. The number of shares you buy will depend on the amount of money you invest. When you sell your shares, you will receive the current market value of the shares.

What happens if a mutual fund company goes bankrupt?

If a mutual fund company goes bankrupt, your mutual fund shares will still be worth something. However, it may take some time to get your money back. The Canadian Investor Protection Fund (CIPF) will protect you up to $1 million if the mutual fund company goes bankrupt.

How are mutual funds taxed in Canada?

Mutual funds are taxed in Canada in a similar way to stocks and bonds. You will pay capital gains tax on any profits you make when you sell your shares. You will also pay dividend tax on any dividends you receive from the fund.

What are the benefits of investing in mutual funds?

There are many benefits to investing in mutual funds, including:

Professional management: Mutual funds are professionally managed, which means that you don't have to worry about picking individual stocks or bonds.

Diversification: Mutual funds offer diversification, which means that your money is spread out across a variety of different assets. This can help to reduce your risk.

Liquidity: Mutual funds are liquid, which means that you can easily sell your shares if you need to.

Tax efficiency: Mutual funds can be tax-efficient, especially if you invest in index funds.

What are the drawbacks of investing in mutual funds?

There are a few drawbacks to investing in mutual funds, including:

Fees: Mutual funds charge fees for management and administration. These fees can eat into your returns.

Risk: Mutual funds are subject to market risk, which means that the value of your shares can go down as well as up.

Illiquidity: Some mutual funds can be illiquid, which means that it can be difficult to sell your shares quickly.

Complexity: Mutual funds can be complex, and it can be difficult to understand how they work.

What are some alternatives to mutual funds?

There are a few alternatives to mutual funds, including:

Exchange-traded funds (ETFs): ETFs are similar to mutual funds, but they are traded on an exchange. This makes them more liquid than mutual funds.

Index funds: Index funds track a specific market index, such as the S&P 500. This makes them a low-cost and diversified investment option.

Individual stocks: Individual stocks can offer higher returns than mutual funds, but they also carry more risk.

Bonds: Bonds are a less risky investment than stocks, but they also offer lower returns.

How can I get help with investing in mutual funds?

There are a few ways to get help with investing in mutual funds:

Talk to a financial advisor: A financial advisor can help you choose the right mutual funds for your needs and goals.

Read financial books and websites: There are many resources available to help you learn more about mutual funds.

Take a financial course: There are many financial courses available that can teach you about mutual funds and other investment options.

What are some resources for learning more about mutual funds?

There are a few resources available to help you learn more about mutual funds, including:

The Canadian Securities Administrators (CSA): The CSA has a website with information about mutual funds and other investment products.

The Investment Industry Association of Canada (IIAC): The IIAC has a website with information about mutual funds and other investment products.

The Canadian Investor Protection Fund (CIPF): The CIPF website has information about the protection offered to investors in mutual funds.

The Globe and Mail Personal Finance section: The Globe and Mail has a personal finance section with articles about mutual funds and other investment products.

The MoneySense website: The MoneySense website has articles about mutual funds and other investment products.

What are the latest trends in the mutual fund industry?

The mutual fund industry is constantly evolving, and there are a few trends that are worth noting:

The rise of ETFs: ETFs are becoming increasingly popular, as they offer a low-cost and diversified investment option.

The growth of index funds: Index funds are also becoming increasingly popular, as they offer a low-cost way to track a specific market index.

The use of technology: Technology is being used in new and innovative ways to improve the mutual fund industry. For example, some mutual fund companies are using technology to allow investors to track their investments in real time.

The focus on ESG investing: ESG investing is becoming increasingly popular, as investors are looking for ways to invest their money in companies that have a positive impact on the environment and society

how to invest mutual fund in canada

The fund manager then uses this money to purchase the underlying assets, such as stocks, bonds, and money market instruments.