What is a mutual fund?
A mutual fund is a pool of money and investments (e.g. stocks, bonds and other types of investments) that are managed by a professional fund manager.
A mutual fund typically focuses on specific types of investments. For example, a fund may invest in:
- high-quality government and corporate bonds,
- stocks from large companies,
- stocks from certain countries,
- stocks in certain industries, or
- a mix of stocks and bonds.
How does a mutual fund work in Canada?
When you put money into a mutual fund, it becomes part of an investment pool managed by professionals who buy stocks, bonds or other assets on behalf of the fund. As assets in the fund rise in value, your share of the fund (typically measured in “units”) will also increase in value. If the value of the fund’s assets decreases, so will the value of your units.
You can own mutual funds in registered accounts like RRSPs, RRIFs, RESPs, TFSAs and some pension plans. You can also own corporate class mutual funds, which may offer certain tax advantages for non-registered accounts. Connect with an advisor for more detailed information.