Mutual funds are best described as investment vehicles – fund managers collect money from investors, and that pooled money is used to invest in assets such as stocks, bonds, and money market investments.
Key Takeaways
- Mutual funds are a collection of financial assets professionally managed in order to maximise profitability for investors.
- Mutual funds are a great way to diversify your investment portfolio, as it shields you from the risk of a low-performing stock.
- In Canada, mutual funds’ MER (the fees) range from 0.50% to 3%.
- Any income or gains realized from mutual funds are taxable.
How we ranked mutual funds
To evaluate mutual funds, we analyze over 10 data points to generate a trustworthy Genius Rating. We consider all aspects of a mutual fund, including minimum investment, available fund types, perks, MER fees, customer satisfaction, and access to personalized advice, to assess its overall value. Then, the mutual fund’s features are rated based on how they stack up against other available options.
Best mutual fund in Canada 2025 winner – BMO Mutual Funds
Minimum Investment
$500
# Of Funds Available
404
Min MER
0.06%
Max MER
2.5%
Mutual funds are a diversified investment in which a pool of money from multiple investors is collected and professionally managed. This is often seen as a decent way to diversify your portfolio, though you should keep an eye on any hidden fees. Most banks have an investing arm that offers mutual funds, including BMO.
Pros
- Available for all registered account types
- Continuous Savings Plan option
- Reasonable mix of fund types and portfolio options
Cons
- $500 minimum investment (or $50/month)
- Higher MERs than some alternatives
Provinces
See Issuer for Details
Eligibility
See Issuer for Details
Why You Want It
Get expert advice on your investments + Choose from over 125 funds.
Special Features
- Set up regular contributions to your investment accounts
- Get $100 for saving regularly
Minimum Investment
$500
Account Types
- RRSP
- RESP
- RRIF
- TFSA
- RDSP
Fund Types
- Security
- Income
- Growth
- Equity Growth
- Group RRSP
# Of Funds Available
404
Porfolio Options
- BMO ETF
- BMO Ascent
- BMO Retirement
- BMO Target Education
- BMO SelectTrust
- BMO Sustainable
- BMO Managed
Min MER
0.06%
Max MER
2.5%
Personalized Advice?
The best mutual funds in Canada 2025 are the BMO Mutual Funds, reliable investment options for Canadians seeking diversified and growth-oriented portfolios. There are conservative and high-growth strategies tailored to individual financial goals and a focus on professional management and long-term performance.
Plus, you can make use of BMO's convenient Continuous Savings Plan (CSP) to automatically use a predetermined amount from your savings account to buy mutual funds each month.
BMO’s commitment to customer service makes it a top choice for Canadian investors.
Why we picked it:
- Available for all registered account types
- Continuous Savings Plan can help you reach financial goals faster
- Healthy mix of portfolio options and fund types
TD Mutual Funds
Minimum Investment
$100
# Of Funds Available
150
Min MER
0.33%
Max MER
2.82%
Like most big banks in Canada, TD offers a number of different investment products for its clients, including TD mutual funds. You can invest in TD's mutual funds through their DIY investment platform, TD Direct Investing, or through your TD Wealth financial advisor. With 150 different funds available, you'll be able to tune your investment portfolio to meet your own precise needs.
Pros
- Plenty of funds available
- Small minimum investment
- Wide range of account types available
- Portfolio options for even easier investing
Cons
- Mutual funds are lower risk and therefore often lower reward
- Professional management means fees
Provinces
See Issuer for Details
Eligibility
See Issuer for Details
Why You Want It
Choose from numerous mutual funds + Get help from an advisor or DIY.
Special Features
- DIY investing option
- Set up regular contributions to your investment accounts
Minimum Investment
$100
Account Types
- TFSA
- RRSP
- Cash
- RESP
- RIF
- Margin
- LIRA
- LIF
- RDSP
Fund Types
- Balanced
- Canadian Equity
- Global Equity
- Fixed Income
- Money Market
- Sector
- US Equity
- Portfolio Solutions
# Of Funds Available
150
Porfolio Options
- Conservative
- Balanced Income
- Balanced
- Balanced Growth
- Growth
- Aggressive
Min MER
0.33%
Max MER
2.82%
Personalized Advice?
TD offers 150 mutual funds to choose from – something for the novice and seasoned investor alike, with portfolio options running the gamut from conservative to aggressive. You can manage your investments with TD Direct Investing, or follow a TD Wealth financial advisor guide you.
Why we picked it:
- Lots of funds to choose from
- Small minimum investment
- Variety of account types available
- Portfolio options for easier investing
Scotiabank Mutual Funds
Minimum Investment
$500
# Of Funds Available
3,500
Min MER
0.079%
Max MER
2.32%
Mutual funds are a relatively safe bet for Canadian investors, in that they are professionally managed, and diversified to withstand the vagaries of the market. Like most big Canadian banks, Scotiabank offers an array of mutual funds, ranging from cash equivalent, to balanced, to index funds.
Pros
- Available for a full array of account types
- Decent set of portfolio options available
- Personalized advice is available
- Reasonable minimum investment
Cons
- Fees are similar to those of other banks
- Relatively few funds available
Provinces
See Issuer for Details
Eligibility
See Issuer for Details
Why You Want It
Low $500 minimum investment + Personalized advice available.
Special Features
- Set up regular contributions to your investment accounts
Minimum Investment
$500
Account Types
- Cash Account
- Margin Account
- Cash Optimizer Investment Account
- RRSP
- TFSA
- RRIF
- RESP
- U.S. Dollar Registered Accounts
- FHSA
Fund Types
- Cash Equivalent
- Income
- Balanced
- Equity
- Index
- Portfolio
# Of Funds Available
3,500
Porfolio Options
- Conservative Build
- Conservative Defend
- Conservative Pay
- Equity Build
- Equity Defend
- Equity Pay
- Moderate Build
- Moderate Defend
- Moderate Pay
- Progressive Build
- Progressive Defend
- Progressive Pay
- Conservative Fixed Income
- Balanced Growth
- Growth
- Income
- Maximum Growth
- Balanced Income
Min MER
0.079%
Max MER
2.32%
Personalized Advice?
Scotiabank offers a smaller number of available mutual funds (97), but still offers options for both novice and experienced investors. Scotia Portfolio Solutions can build a diversified portfolio for you, with mutual funds spanning various industries, investment approaches, and markets, and aligning with your financial goals.
Why we picked it:
- Can hold mutual funds in Scotia iTrade cash accounts as well as registered accounts like RRSPs
- Offer four different portfolio options based on risk appetite and financial goals
- Scotiabank personalized advice is available
What is a mutual fund?
A mutual fund is a financial investment instrument that holds a variety of investments within a single fund. It can hold:
- Stocks
- Bonds
- Options
- Short-term money market products
- Other securities
Professional money managers collect funds from investors and add this money to a mutual fund to buy financial assets. This allows investors to purchase a wide variety of financial assets at relatively low cost.
Mutual funds are actively managed, meaning the fund attempts to beat average market returns.
Who should invest in mutual funds?
Mutual funds are good investments for anyone looking to diversify their financial portfolios. You never want to "put all your eggs in one basket", and mutual funds allow investors to own various types of financial assets. This minimizes risk by insulating you against the impact of a poorly performing stock.
Novice investors looking to enter the market will be enticed by mutual funds’ relatively low cost of entry. These low costs allow investment in a mutual fund’s wide variety of financial products. You will still have to pay management fees to the advisor running the fund.
Mutual funds are convenient – your fund manager does all the work of researching, picking products to invest in, and monitoring those investments.
Mutual fund fees
A mutual fund’s cost is typically expressed as Management Expense Ratio (MER). These fees run from 0.50% to more than 3%, but this can vary depending on the fund and who is managing it.
An MER is typically built into the price of a mutual fund (it is not charged as a separate fee). An MER is typically made up of the following costs:
- Investment management fee: Covers the cost of having an investment professional manage the mutual fund you’ve invested in
- Operating expenses: Cover the day-to-day operation of the administrative and management costs of the fund
- Taxes: Covers taxes on any management and operational fees
- Trailing commission: Covers service and advice given by your fund’s management team
Types of mutual funds
In Canada, mutual funds typically fall into one of eight categories:
- Fixed income: A mutual fund made up of corporate or government bonds
- Money market: Also known as a "cash fund," making short-term investments in things like bonds, treasury bills, and other low-risk securities
- Balanced: A mutual fund with a mix of income securities and equities
- Global: A fund made up of fixed-income securities or foreign equities
- Growth/equity: A fund with stocks or ETFs (exchange-traded funds)
- Index: A type of fund meant to mirror a certain market, such as the S&P 500
- Speciality: These funds hold fixed-income securities or equities in specific sectors (such as resource extraction) or regions (such as Asia)
- Fund of funds: A mutual fund that buys shares in other funds
How to invest in mutual funds
Seasoned mutual fund investors may be comfortable embarking on a self-directed investing journey. But novice mutual fund investors will likely feel more comfortable going through financial institutions like banks and credit unions, or by working with a financial advisor.
Here are some tips if you’re thinking about investing in mutual funds:
- Set your financial goals: Are your financial goals short-term or long? What’s your tolerance for risk? These factors will play a big part in the type of mutual fund you invest in.
- Pick mutual funds aligned with your goals: Your financial goals will likely dictate the fund you invest in – risk-averse investors with medium- or long-term timelines might opt for Fixed Income Funds, while risk-taking investors might look at a high-risk, high-reward fund, such as a Growth Fund.
- Review a fund’s performance history: Examine a fund’s past performance – this doesn’t guarantee results, but it will likely give you an idea of how the fund will perform.
- Understand mutual fund fees: The Management Expense Ratio (MER) are the fees you’ll pay for the mutual fund’s professional management, and an MER can range from 0.50% to 3%, depending on the fund and/or financial institution.
- Invest your money: Once you find a fund you’re comfortable with, start investing in it – investing a set amount regularly will likely mean you’ll pay less, on average, per share over time than only investing once (especially at a peak period), known as "dollar-cost averaging."
- Monitor your investment: Keep an eye on the fund you’ve invested in – if your financial goals or lifestyle changes, you may want to vary your mutual fund investments to ensure you maintain a balanced portfolio.
What are mutual fund classes?
You may notice that there's a letter at the end of the name of each mutual fund – each letter signifies the class that the specific fund falls under.
Here are the different mutual fund classes and what they mean:
- Series A: These typically have low minimum investment requirements and are usually sold by financial advisors to retail investors
- Series D: Low management fees are the norm with these, partially because they're directed towards DIY investors and sold by discount brokerages
- Series F: These are mostly bought by investors who have a fee-based system with their advisors – these funds usually have low management fees
- Series I: With high minimum investment requirements, these are usually bought by institutional investors
- Series T: These are tax efficient and/or advantaged, offering investors regular, monthly cash distributions through a fixed distribution rate
If you're a newbie DIY investor, you'll want to stick with Series D mutual funds. But the further you delve into the investment world and the more comfortable you become, you may choose to branch out and look at other series types.
Pros and cons of mutual funds
When you’re investing in mutual funds, know that they have advantages and disadvantages. Here are the most prominent of both.
- Diversified portfolio: Mutual funds hold a variety of stocks, bonds, and securities, shielding investors from the risk of a poorly performing asset.
- Affordable: With assets pooled together, investors can pay one price to invest in a mutual fund (and all of its assets), as opposed to paying for individual stocks.
- Convenience: Mutual funds are run by professional managers, who research, strategize, and orchestrate trades with the goal of boosting your return-on-investment.
- Ongoing management fees: Having a professional oversee your mutual fund comes with a cost, ranging from 0.50% to 3%.
- Unpredictability: Even an expert fund manager won’t be able to predict every fund’s performance, meaning there is always a risk of investors losing money.
- Capital gains tax: If an asset within a mutual fund is sold for gains, a capital gains tax may be assessed, which would lower investors’ returns.
Mutual funds alternatives
Some alternatives to mutual funds include direct ownership in stocks and bonds, as well as Exchange Traded Funds (also known as ETFs).
Let's take a look at two of the main alternatives.
ETF vs. mutual funds
ETFs function similarly to mutual funds, but usually have lower management fees associated because they're passively managed, often automatically – ETFs mirror the stock market’s performance. This means there's more automated buying and selling of shares that takes place inside the ETF than with a mutual fund.
On the other hand, professional managers actively manage mutual funds, attempting to beat average market returns. Fund managers are constantly searching for ways to increase the profits for their shareholders.
Index fund vs. mutual funds
Some mutual funds invest in specific stock market indexes, but most are actively managed, purchasing shares across multiple indexes to maximise profitability.
Index funds are typically a form of ETF tracking a specific index such as the TSX or DOW JONES, and are passively managed.
In sum – mutual funds attempt to outperform the markets, while index funds seek average market returns.
Both index funds and mutual funds invest in stocks, bonds, and other securities.
Are mutual funds taxable?
In Canada, income from mutual funds is taxable, and can be taxed in two ways:
- Owning shares: While owning shares or units in a mutual fund, investors are taxed on any income flowing their way
- Redeeming shares: If investors cash out of a mutual fund, they will be taxed on any gains
Editorial Disclaimer: The content here reflects the author's opinion alone, and is not endorsed or sponsored by a bank, credit card issuer, rewards program or other entity. For complete and updated product information please visit the product issuer's website.
FAQ
What is a mutual fund?
A mutual fund is a financial investment instrument that pools investor money in order to hold stocks, bonds, short term money market products, or a combination of all three – as well as potentially other investments. It's actively managed, which means it tends to have higher fees than other tools.
Should I invest in a mutual fund?
You should consider investing in mutual funds, but be aware of the potentially higher management fees associated with these types of actively managed funds.
What's the difference between an ETF and a mutual fund?
The main difference is that ETFs are passively managed and mutual funds are actively managed. This means higher fees are associated with mutual funds, as they try to outperform the average market return.
How do I invest in a mutual fund?
Mutual funds can be purchased through a financial advisor, a bank, or online through a discount broker.
Are mutual funds safe?
Mutual funds can be a safe investment, but like any financial product that holds stock and bonds, it's at the whim of the financial markets. Dividends associated with the mutual funds can also change depending on the markets.
What are the best mutual funds in Canada?
We recommend looking at TD Mutual Funds for the best mutual funds in Canada. They have an impressive list of choices, reasonable MERs, and low minimum investments. You can choose DIY investing or work with a TD Wealth advisor.
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