How to Buy Mutual Funds in Canada: Step-by-Step Guide

Did you know mutual funds have been part of Canada’s financial landscape since the Great Depression? While exchange-traded funds (ETFs) have become popular in recent years, mutual funds remain a primary choice for many Canadian investors. According to the Investment Funds Institute of Canada (IFIC), at the end of 2022 there were 3,409 mutual funds and 1,056 ETFs in Canada. Total assets invested in mutual funds were roughly $1.8 trillion, compared with about $314 billion in ETFs.

What are mutual funds?

Investing directly in individual stocks or bonds isn’t for everyone. Mutual funds offer an alternative that allows many investors to access diversified portfolios without selecting each security themselves. A mutual fund pools money from many investors to buy a portfolio of securities managed by professional portfolio managers. Investors purchase units that represent their share of the pooled holdings, giving them indirect exposure to the fund’s assets.

The value of each unit changes daily according to the performance of the underlying holdings. For example, if you own 10 units priced at $50 each, your investment is worth $500. If the fund’s portfolio gains 1% (after fees), your holding would rise to about $505. Mutual funds can be held in both registered and non-registered accounts. Registered options include registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs), which provide tax-deferred or tax-free treatment as applicable.

What’s the difference between mutual funds and ETFs?

Mutual funds and ETFs are both pooled investment vehicles that provide diversification, professional management, and convenience for investors, but they differ in important ways. Both charge fees for management, commonly expressed as the management expense ratio (MER), which is a percentage of assets under management.

The most noticeable differences are how they’re bought and sold and how often their prices change:

• ETFs trade on stock exchanges like individual stocks, and their share prices fluctuate continuously throughout the trading day.
• Mutual funds are purchased through a dealer or brokerage, and their price—the net asset value per share (NAVPS)—is calculated once per business day, typically after markets close.

Management fees for mutual funds are often higher than those for comparable ETFs, in part because mutual fund investors frequently receive advice from financial advisors. Some research suggests that working with an advisor can improve long-term outcomes for investors, but whether to use an advisor depends on your situation and preferences.

Other differences to weigh when choosing between mutual funds and ETFs include:

• Your comfort level with placing trades yourself versus relying on an advisor. Working with an advisor can affect the effective cost you pay for a fund.
• Investment approach. ETFs are most often passively managed to track an index, while many mutual funds are actively managed with the goal of outperforming a benchmark.

	Mutual funds	Exchange-traded funds
How to buy	From a mutual fund dealer or brokerage	On a stock exchange
Prices	NAV is calculated once per weekday, usually at market close	Share price fluctuates throughout the trading day
Account types	Registered and non-registered	Registered and non-registered
Fees	MER and, if using a brokerage, trading commissions	MER and trading commissions (if applicable)
Management style	Often actively managed	Mostly passively managed index funds

What to consider when choosing mutual funds?

There are many mutual fund options available. Before investing, review the following factors to find funds that align with your needs:

• Investment time horizon: If you plan to invest for many years—seven years or more—you may favor funds that target long-term capital appreciation. Longer horizons tolerate more short-term volatility and may suit actively managed growth strategies.
• Investment goal: For specific short-term objectives, such as saving for a home down payment, consider funds that focus on money-market instruments or very short-term fixed-income securities, which aim to preserve capital and deliver liquidity.
• Risk tolerance: Assess how much volatility you can accept. Mutual funds typically indicate a risk level on the fund’s facts document or issuer website, which can help match a fund to your comfort with market swings.
• Investment objective: Some funds prioritize income—through dividends or interest—while others emphasize capital growth. The fund’s objective is disclosed in its offering documents and should align with your goals.

How to buy mutual funds in Canada

Canadian investors generally have two main ways to purchase mutual funds:

• Financial advisors: Advisors at banks or independent wealth management firms who are licensed to sell mutual funds can help you evaluate options, recommend suitable funds, and provide ongoing advice.
• Discount brokerages: If you prefer a do-it-yourself approach, discount brokers allow online purchases and sales of mutual funds. Many issuers offer low-fee series, such as Series F, that are available through discount brokers. When buying through a brokerage, you may incur trading commissions depending on the platform.

Mutual funds offer a convenient way to access a diversified portfolio without managing the day-to-day investment decisions yourself. Before investing, review fund facts, prospectuses and fee structures to ensure the fund matches your time horizon, goals, risk tolerance and investment objectives.

For more information about Fidelity Investments mutual funds, consult Fidelity Investments materials or speak with a licensed representative.

Read more about investing:

• What’s under the hood? A look at what goes into all-in-one ETFs—and how they work
• Using ETFs to maximize your TFSA contribution room
• Five ways to invest sustainably for Canadian investors
• Emotional investing: How to make better decisions with your money