What is it?
A mutual fund is one of the most common types of investments funds. It’s a pool of investments owned by a group of investors and managed by a professional. The investments included in your mutual fund are determined by its objectives (like long-term capital appreciation, income generation, or preservation of capital) and can include products such as stocks, bonds and other fixed income securities, or a mix of both.
When you invest in a mutual fund, you purchase a unit that represents ownership in the fund. The value of each unit can increase and decrease daily based on the performance of the portfolio. You can hold your mutual funds in registered and non-registered investment accounts. Registered investments are those that are held within tax-advantaged accounts registered with the government while non-registered investments are held in regular, taxable accounts and do not offer the same tax advantages as registered accounts.
What can I use it for?
A mutual fund can be used to invest in a RRSP, TFSA, or your regular savings. They come in a variety of options for all risk appetites including low, balanced, and high growth. Investments are not guaranteed and while they do carry some risk, mutual funds are considered a safer investment than purchasing individual stocks due to mutual funds holding many stocks within one investment.
Why invest in a mutual fund?
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.
Mutual funds are for 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.
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?
People often ask what the difference is between a mutual fund and an exchange-traded fund (ETF). Both are types of pooled investment funds, but the main difference is how they’re bought and sold. ETFs are bought and sold on a stock exchange, just like stocks, and are traded whenever the stock market is open. ETF prices continuously fluctuate. Mutual funds are bought through your advisor directly from the mutual fund company issuing units and are priced only once per day based on their net value. To learn more about the differences, Qtrade Direct Investing® takes an in-depth look at ETFs and mutual funds.
You can choose from different mutual funds, and an advisor can help you pick the right one for you. You can use mutual funds for things like saving for retirement, building wealth, earning regular money, or paying for education. They work best for your goals that are medium or long-term.
You’ll typically pay taxes on the earnings you make from a fund, with interest, dividends, and capital gains being treated differently for tax purposes. However, if your mutual fund is held within a registered plan, you won’t incur income tax as long as the money remains in the plan.
Mutual funds don’t earn a fixed interest rate, so they don’t accumulate compound interest. Instead, your investment grows over time through a process known as compounding, where your investment multiplies. There’s no limit on how much you can contribute to a mutual fund, but there may be restrictions imposed by the mutual fund company or the investment platform used.
Is this right for you?
✔ Right for you if you:
You’re seeking diversity. Since you’re buying units of a fund that typically hold 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 will likely 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.
Accounts for your mutual funds
You've settled on mutual funds, and it aligns perfectly with your financial objectives. It's time to choose the right account to invest your funds in and watch them flourish. Discover the array of options that Conexus in partnership with Credential Asset Management Inc. and Credential Securities provides access to – there's a wealth of opportunities waiting for you!
An RRSP is a government-registered retirement savings plan that offers tax benefits today by reducing your current income tax, and it allows your money to grow tax-free until retirement when you'll likely be in a lower tax bracket. It's a smart step for your financial future.
If you're 18 or older in Saskatchewan and have a valid social insurance number (SIN), the TFSA is your gateway to saving and earning money without the burden of taxes. With a TFSA, your contributions and the income you generate within the account are tax-free, even when you decide to make withdrawals. It's a lifelong opportunity to grow your wealth while keeping more of what you earn.
Mutual funds are offered through Credential Asset Management Inc. Mutual funds and other securities are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc. Online brokerage services are offered through Qtrade Direct Investing, a division of Credential Qtrade Securities Inc. Qtrade and Qtrade Direct Investing are trade names and/or trademarks of Aviso Wealth Inc. The information contained on this webpage was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This information is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds and other securities. The views expressed are those of the not necessarily those of Credential Asset Management Inc or Credential Securities.