Mutual Funds Canada | To Invest in Professionally Managed, Diversified & Balanced Portfolio

October 14, 2021 | Editorial Team

Passive income is one of the best ways to make money, and investing is a great way to go about obtaining it. Many Canadians choose to invest in mutual funds because they tend to below-risk and are professionally managed.This means you can simply invest your money and just watch it grow from the sidelines.

If you are looking to invest in these funds but want more information first, you’ve come to the right place! Please read on to find out more about mutual funds in Canada.

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What is a Mutual Fund?

A mutual fund is a type of investment that pools money from various investors to purchase a variety of securities. Mutual funds typically invest in stocks (see ‘Best 5G Stocks Canada‘ and ‘Best Canadian Stocks to Hold Forever‘), money market instruments, and bonds. These funds are professionally managed by financial professionals, such as money managers.

Investors will thus have access to a diversified, balanced portfolio. They just have to pay a low fee for the financial professional taking care of their portfolio.

There are various types of mutual funds. The most popular tend to be money market funds, bond funds, stock funds, target-date funds, high volatility, or low volatility. We will go through more information about the various mutual fund types throughout this article.

You can earn money with your mutual fund in three different ways. First, you can earn income from dividends on the stocks or interest on the bonds in your mutual fund. You can also earn money from capital gain. Lastly, if the mutual fund has increased in price, you will benefit. You can sell your mutual fund, and you will receive more money than what you spent on buying it.

Why Do People Buy Mutual Funds?

Many people in Canada choose to invest in mutual funds because they tend to be low to medium-risk investments. Investing in a single stock or bond, for example, is more of a risk. If the company you have stocks with fails, that entire stock will be a loss. Since mutual funds invest in a variety of securities, if one fails, the others can make up for it.

They are also easy to obtain as you can get them from banks, credit unions, and various firms. As you can buy or sell your mutual fund at any time, you aren’t tying your money down to anything for a strict amount of time. This makes them a candidate for short term investments.

Investing in mutual funds also allows you to diversify your portfolio. As you are pooling your money with other investors, you can access more securities than you could alone.

Lastly, as these funds are professionally managed, it takes the pressure of investing off of you. Investing can take up a lot of time, especially if you don’t know what you’re doing. Having a professional to do it for you makes the process much easier.

What Types of Mutual Funds are There?

Money Market Funds

Money market funds invest in debt instruments, cash equivalents, and cash. A money market fund is a low-risk type of mutual fund. It is only meant to be a short-term investment as they have very little capital appreciation.

Bond Funds

A bond fund invests solely in bonds. It is a better way to invest in bonds as it is more diversified than purchasing individual bonds such as one from the TD Canadian Bond Index Fund. A bond fund typically provides a monthly income, so they are good for short-term or long-term investments.

Stock Funds

A stock fund invests solely in stocks of a listed company. They can be either mutual funds or exchange-traded funds (ETFs). Stock funds tend to function best as long-term investments. Stock funds can be further broken down into seven different types of funds. Index, growth, value, sector, income, balanced, and asset allocation.

Target Date Funds

Target-date funds can also be either mutual funds or ETFs. They are aptly named as they are optimized to grow assets by a target date. Having a specific date in mind means investors can use target-date funds for things like retirement or their children’s tuition.

Mutual Funds Pros

  • The biggest advantage of a mutual fund is how diverse it can be. With one fund, you can have access to a variety of stocks, bonds and/or other securities. This reduces the risk of investment as you have more of a chance to earn.
  • It is easy to buy or sell a mutual fund. You can do so whenever you want at the end of any trading day.
  • As you are pooling your money with other investors, you can make smaller investments. For example, $100 may not get you stock, but it can be invested into a fund.
  • New investors can take advantage of a fund as it is professionally managed. You will not need to worry about the investment process yourself as you will have the expertise of a professional.
  • Having your portfolio professionally managed also makes the process convenient, even if you do have experience with investing.
  • Similarly, who manages your portfolio is up to you. Different fund managers focus on different things. One might prefer emerging markets over developed markets, for example. Find a fund manager whose goals meet your own.
  • Whatever money you make from dividends or interest can be reinvested into additional fund shares. This will help you further grow your portfolio without paying extra fees to purchase new funds.
  • Investors can check fund facts of a fund before investing. Fund facts highlight key information about a fund, such as performance history and cost. Fund facts are required from all mutual funds and ETFs.

Mutual Funds Cons

  • You will have to pay fees to invest in mutual funds, regardless of how well or poorly your fund does. Fees will go towards the professional manager or for other administrative reasons.
  • Investors won’t always know what is going on with their portfolio. As your fund will be managed by someone else, you don’t have much of a say in any decision making.
  • There is no guaranteed return when investing in mutual funds. This means you are taking a risk by investing in them.
  • Investing in too many mutual funds can actually hurt your odds. Some investors invest in a variety of mutual funds in the same sector. If that sector does poorly, all of your mutual funds will suffer.
  • Mutual fund redemptions can only take place at the end of the trading day.
  • Researching and comparing one fund to another can be hard. This is because mutual funds don’t offer data such as earnings per share, sales growth, or a price to earnings ratio.

How to Buy and Sell Mutual Funds: Questrade

Questrade is an online broker based in Canada. Questrade has been around since 1999, so it is a well-established broker. You must be living in Canada to use Questrade, not simply just be a Canadian citizen.

On Questrade, residents of Canada can trade mutual funds as well as options, bonds, ETFs, and stocks. On a separate platform, Canadians can also trade forex and contracts for differences (CFDs). Guaranteed investment certificates, initial public offerings, precious metal purchases, and international equities are also available on Questrade.

Here are some of the pros and cons of using Questrade.


  • You can access Questrade from its web platform, desktop platform or mobile app.
  • Questrade offers a wide range of research tools to provide investors with more information. There are chart pattern tools, news, webinars, how-to guides and many more tools available!
  • Customer service is readily available. You can talk to someone via Questrade’s online chat, over the phone, or through email. Simply look for the ‘contact us’ section on the Questrade website.
  • Questrade waived their inactivity fee, which was one of the things people complained about most.
  • Robo advisors are available on Questrade to take over investing for you.
  • Questrade has a wide range of products offered. You can trade options, funds, bonds, stocks, and much more.
  • Questrade has lower fees compared to other online brokers (see also Scotia iTrade Review).


  • You must be living in Canada to use Questrade. Even if you are a Canadian citizen living abroad, you cannot use Questrade.
  • Questrade has a minimum deposit of $1,000 to open an account.


Questrade is a great online broker for those based in Canada. You can make a variety of trades on the platform, not just mutual funds. It is a great place for new investors as well as you can work with a robo advisor to set up your portfolio for you. They can even manage your portfolio for you if you would rather take a hands-off approach.

If you are not based in Canada and don’t have $1,000 to open an account on Questrade, you will have to look for other online brokers. Otherwise, Questrade is a great, reliable option. Head to their website for more information or look for the ‘contact us’ section to talk to someone.

The Bottom Line

Whether you’re investing in bond funds, stock funds, high volatility, low volatility, target-date funds, or more, mutual funds tend to be a great investment. You can easily diversify your profile by making these types of investments, and you can hand over the reins to a professional. You won’t need to worry about making any tough decisions yourself. This makes investing in a mutual fund perfect for new investors.

The best place to start is by researching various fund managers. Find one that suits your needs and goals to ensure you are getting the most out of your investment. Alternatively, using an online broker like Questrade is also a great idea, and you can find a robo advisor to help manage your portfolio.