What is a mutual fund?
A mutual fund, managed by a professional fund manager, is a collection of money and various investments such as stocks, bonds, and other assets.
A mutual fund usually specializes in particular types of investments. For instance, it might concentrate on:
- Government and corporate bonds of high quality,
- Stocks of large corporations,
- Stocks from specific countries,
- Stocks within particular industries, or
- A blend 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, 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.