Investing in Canadian mutual funds

Find out everything about Canadian mutual funds: what they are, the pros and cons, how to invest. Plus: a quick overview of the 10 best performing mutual funds

Investing in Canadian mutual funds

You have many options when it comes to investing, and one of them is mutual funds. It’s popular among investors because it allows them to diversify, shielding their portfolio from any sharp market volatilities.

In this article, we’ll discuss what mutual funds are, their pros and cons, and points to keep in mind when investing. We’ve also listed the 10 best performing mutual funds in the industry.

What are Canadian mutual funds?

Canadian mutual funds are a type of investment tool where money is gathered from numerous investors which is pooled together to create capital or fund.

This capital is then invested into different financial assets like bonds, stocks, and money market investments.

Fund Managers take responsibility for managing the pooled money and investing to produce returns, profits, or gains for its investors.

What are the advantages of mutual funds?

According to a 2020 study conducted by Scotiabank, 64% of Canadians say that mutual funds are their most frequently used investment product. Why do so many investors choose mutual funds? Let’s go over some of their advantages:

Portfolio management is advanced

When you purchase a Canadian mutual fund, you will be charged with a management fee.

The minimal amount you pay in your expense ratio is a small price for getting the help in managing the investment portfolio that you have.

Reinvestment dividend

When investing in mutual funds, dividends and other interest income sources are declared in the fund. These dividends are then used to purchase additional shares in the mutual funds which helps your investment grow more.

Safety in risk reduction

Canadian mutual funds are not invested in a single asset; instead, it is across different portfolios through a diversification method.=

Your hard-earned money will not go to waste and will experience low risk which can guarantee returns.

Fair pricing and convenience

The most important reason why investors choose mutual funds is because they are easy to navigate and understand. In addition, these funds do not require big capital investments and are traded only once a day during their closing net asset value (NAV).


Mutual funds are considered liquid investments, which means that they can be pulled out when uncertainties come.

The Net Asset Value Per Share (NAVPS) of a mutual fund is based on the market value and calculated every business day according to the individual securities within the portfolio.

So, if you must redeem your portion or share of the units, you will receive the value for that day.

Read about the basics of mutual funds in our guide for the beginner investor.

What are the disadvantages of mutual funds in Canada?

Sales charges and high expense ratio

Expense ratio and sales charges are common fees that you will see in mutual funds.

Although mutual funds are known for minimal risk and funding requirements, expense ratio may reach 1.50%. That percentage may seem small, but it is considered working on the higher cost end. So, be cautious when investing in funds and double check their expense ratio.

You may also want to check if the portfolio has a 12b-1 advertising fee or sales charges in general. 12b-1 is an annual marketing or distribution fee used by many companies to cover some of their operational costs.

Therefore, it will be best to work with companies that have no sales charges.

In the end, be wary of expense ratio and sales charges since they may reduce your overall investment return.

Abuse in management

If your mutual fund manager is abusive in their authority, your investment may experience turnover, churning and window dressing. What this means is that your fund may go to unnecessary trading, excessive replacement and selling the lost funds before the quarter ends.

Inefficiency in tax

Whether you like it or not, when you invest in Canadian mutual funds, you will be left with no choice but pay for capital gains.

Since the funds experience turnover, gains, redemptions, and losses in security holding throughout the entire fiscal year, investors often receive distributions from the fund which can lead to uncontrollable tax.

Poor trade execution

If your mutual fund trade is placed before the cut-off time for the same day net asset value (NAV), you are more likely to receive the same closing NAV price.

If you are an investor looking for faster execution and returns due to short-term investment, or want to do daily trading, or proper timing in the market, then mutual funds might not be for you.

To summarize everything, here is a table of the pros and cons of Canadian mutual funds:


Canadian mutual funds pros and cons table

What are the best performing mutual funds in Canada?

Some Canadian funds do better than others, and here are the 10 best performing Canadian mutual funds:

1. Mackenzie Canadian equity F series

First on the list is Mackenzie Investments, a non-bank asset manager that offers an equity mutual fund.

The Mackenzie Canadian equity fund is known for its long-term exceptional performance in the market compared to its equity peers.

The equity fund also has large fund assets handled by the company’s management.

Mackenzie Canadian equity F series focuses on large Canadian stocks and combines growth and value stocks. It’s considered a medium-risk mutual fund.

2. RBC Canadian equity income fund F Series

The RBC Canadian equity income fund F series or coded as RBF646 is an all-equity mutual fund offered by the Royal Bank of Canada.

The fund focuses on high dividend Canadian stocks, holds large-cap, and pays out distributions monthly.

This fund is made possible by the collaboration of three banks: Royal Bank of Canada, Toronto Dominion, and Enbridge Inc.

3. Canoe global equity F series

Canoe may be a small Canadian investment manager, but the company offers global equity mutual funds to the Canadian market.

Canoe labels their global equity F series as a medium risk investment, but the performance of this portfolio has been remarkably good in several aspects.

4. Invesco select balanced fund F series

If you are seeking a stable and an all-in-one portfolio, this asset might be one of your options. This mutual fund invests in corporation and government bonds.

5. Fidelity Canadian short-term bond fund F series

Fidelity is a globally known Canadian investment manager that offers a fixed-income mutual fund.

The Fidelity short term bond or FID685 invests in short term bonds with the aim of reducing interest rate exposure, which makes the funding at low risk.

6. CI Canadian dividend fund series F

CI Canadian dividend fund holds a net asset amounting to $1.7 billion which makes them one of the best dividend mutual funds in Canada.

For the past few years, the capital in this fund was able to double in return. The fund invests in large-cap dividend stocks and a few foreign stocks.

CI Canadian Dividend Funds Series F is one of the best-performing mutual funds in Canada for 2023. Learn more here.

7. PIMCO monthly income fund F series

PIMCO is making noise in the Canadian economic market through the monthly income mutual fund that it provides.

The monthly income fund is categorized as low risk, but it is somehow sensitive to changes in interest rates. It invests in average-quality bonds.

8. Lysander-Canso balanced fund F series

Another non-bank Canadian asset manager that provides quality investment funds is the Lysander-Canso.

Their balance fund invests in medium-size stocks and has cheap trading valuations. For bonds investment, the company works with those that have a low sensitivity and interest rate changes.

Combining these things together, the Lysander Canso balanced fund is considered a medium risk investment.

9. Manulife fundamental balanced class F Series

Manulife, a financial corporation globally known for their insurance products, also offers mutual fund investments.

The Manulife fundamental balanced class invests in growth-oriented stock and highly sensitive interest rate change bonds.

10. NBI global equity fund F Series

The Canadian mutual fund from National Bank rounds up our list. National Bank has a global equity fund that focuses on large global stocks which assures growth in returns.

How to choose a mutual fund

When picking a mutual fund to invest in, it's best to compare the fund management style, returns and fees.

In doing that, see how the mutual funds of the different companies work. Also, each fund often comes with a market benchmark that affects the overall result of your fund.

In the end, the mutual fund’s return highlights the performance of the fund.

What are the risks of mutual funds?

Investments are not risk-free. The pooled capital in mutual funds may fluctuate and change its value whenever the market conditions drop down. In addition, the performance of an investment may differ according to the invested company or business.

For example, if the mutual fund is invested in a company that performed poorly, the returns and profits are highly affected and may be dragged down.

Another risk to consider is the management team that will handle the portfolio and the possible changes in the fees and dividends.

Remember that there will always be a mutual fund suitable to your risk tolerance, preference, strategy, and financial goals. Seek guidance and advice from authorized financial advisors to help you make decisions on investing in mutual funds.

Read and bookmark our Investments page to find out everything there is to know about mutual funds, ETFs, and other ways to invest.

What do you think about Canadian mutual funds? Is this something that you’re interested in? Let us know by leaving a comment below: