What are mutual funds?
A mutual fund is an investment that pools money from many investors to create a portfolio of investments managed by a professional. Depending on the fund’s goals, it may hold a mix of investments such as stocks, bonds and other fixed-income securities. Mutual funds are designed around different objectives, including growth, income generation or preserving your investment.
When you invest in a mutual fund, you purchase units of the fund. The value of each unit changes based on the performance of the investments held within the portfolio. Mutual funds can be held in registered accounts, such as RRSPs and TFSAs, or in non-registered accounts.
Mutual funds offer a way to diversify your investments by spreading your money across many different assets within a single investment. They are available in a range of options to match different comfort levels with risk, from more conservative options focused on stability to higher-growth options with greater potential for returns. Mutual funds are not guaranteed and their value can fluctuate based on market performance.
Why choose mutual funds?
Diversification
Spread risk across many stocks and bonds.
Your mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds and other securities. This diversity helps spread the risk associated with investing.
Accessibility
Start investing with just a small amount.
Mutual funds are accessible to everyone, whether you're new to investing or have experience. You don't need a lot of money to begin investing – even a small amount can get you started.
Convenience
A simple way to invest without constant research.
Mutual funds offer a simple way to invest in a mix of assets without requiring you to do a lot of research or constantly manage your investments.
How does it work?
Mutual funds pool money from many investors to purchase a portfolio of investments, such as stocks, bonds and other securities. A professional fund manager oversees the investments based on the fund’s objectives, helping you invest in a diversified portfolio without having to choose each investment individually.
There are many types of mutual funds available, with options designed for different goals and comfort levels with risk. They can be used for medium- and long-term goals such as saving for retirement, building wealth, generating income or funding education. A Conexus advisor can help you choose a mutual fund that aligns with your goals and investment plan.
Mutual funds are bought and sold through your advisor or investment provider and are priced once per day based on the value of the investments held within the fund. Unlike a GIC, mutual funds do not earn a fixed interest rate, and their value can increase or decrease based on market performance. Any earnings may be subject to tax depending on whether the fund is held in a registered or non-registered account.
Is this right for you?
Right for you if:
- You're seeking diversity. Since you're buying units of a fund that typically holds a broad range of individual securities such as stocks and bonds, you're getting a good mix of investments. Plus, you'll have access to different sectors like technology and healthcare so you can gain exposure to sectors.
- You want to spread the risk. When you diversify, it will help reduce the impact of poorly performing investments. If one product underperforms, it could be offset by better performance in others.
- You don't want to actively manage your investments. Mutual funds are managed by professional portfolio managers who have expertise in selecting a diversified mix of products. They aim to optimize the fund's performance while managing risk as well.
May not be right for you if you:
- You have a specific investment strategy or niche. It's likely that a mutual fund won't represent the niche you're looking for, since their availability may vary.
- You have a strong interest in specific stocks or bonds. If this is the case, you'll want to invest into these stocks or bonds directly. Consider an ETF in this case.
Tools to help you reach your goals.
Common questions.
Here’s what people ask us the most.
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Mutual funds can generate returns through the growth of the investments they hold, as well as through income such as dividends or interest. Your return depends on how the investments within the fund perform, and the value of your investment can increase or decrease over time.
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No. Mutual funds are not guaranteed investments, and their value can fluctuate based on market performance. The level of risk depends on the type of mutual fund and the investments it holds. A Conexus Advisor can help you choose an option that aligns with your goals and comfort with risk.
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Both mutual funds and ETFs are pooled investments that can help you diversify your portfolio. The main difference is how they are bought and sold. Mutual funds are purchased through an advisor or investment provider and are priced once per day after the market closes. ETFs trade on a stock exchange throughout the day, similar to stocks.
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Yes. Mutual funds can be held in registered accounts, such as RRSPs and TFSAs, as well as non-registered accounts. The account type you choose may impact how your investment earnings are taxed.
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Mutual funds are purchased through an advisor or investment provider. Conexus members can work with an advisor to explore mutual fund options and choose an investment that fits their goals, or use Qtrade Direct Investing to buy and manage eligible mutual funds online on their own. The right option depends on how involved you want to be in managing your investments and the level of support you need.
We're here to help.
Not sure which investment option is right for you? Our advisors can help you understand your choices, explore different options and create a plan that fits your goals and financial situation.
