With over 5,000 mutual funds available in Canada, choosing the right funds can be overwhelming.
While no one can predict future performance, there are some funds that have consistently performed better than others.
We have identified the biggest Canadian mutual funds based on assets under management.
Although the size of a fund does not always indicate investor confidence, it can act as an indicator.
Additionally, we have also considered other factors such as risk, past performance and fees to provide you with a list of the best mutual funds in Canada.
Top Mutual Funds in Canada
Based on performance and stability, here are the 10 best mutual funds in Canada:
- Mackenzie Canadian Equity F Series
- Scotia Canadian Equity F Series
- RBC Canadian Equity Income Fund F Series
- RBC Vision Global Equity Fund F Series
- NBI Global Equity Fund F Series
- Canoe Global Equity F Series
- Beutel Goodman Core Plus Bond Fund F Series
- Fidelity Canadian Short-Term Bond Fund F Series
- TD Canadian Corporate Bond Fund F Series
- PIMCO Monthly Income Fund F Series
These mutual funds range in size, asset management, investment focus, and level of risk.
Beutel Goodman prioritizes low-risk investments with some interest rate sensitivity and average bond quality.
Fidelity Canadian Short-Term Bond Fund focuses on short-term Canadian bonds, offering low risk and impressive long-term performance.
TD Canadian Corporate Bond Fund invests in Canadian corporate bonds, low risk with sensitivity to interest rates and average-quality bonds.
PIMCO Monthly Income Fund invests in average-quality bonds and is sensitive to interest rates, boasting a long track record of performance.
Understanding Mutual Fund Advantages and Disadvantages
Mutual funds offer several advantages, including diversification, professional management, and affordability.
Benefits of investing in mutual funds consist of access to a variety of investments, effective portfolio management, and building a well-rounded portfolio.
However, disadvantages include higher fees and less liquidity compared to other investment options.
Canadians have an estimated $1.9 trillion invested in mutual funds, making them a reliable and successful investment vehicle.
When selecting the best mutual funds in Canada, factors to consider are return on investment (ROI), fees, past performance, fund manager expertise, and liquidity.
Different mutual funds cater to specific types of investors, so assessing the underlying funds is essential to match individual needs and risk tolerances.
3. Low-Risk and Short-Term Bond Mutual Funds
Investors seeking a more conservative approach to their portfolio may want to consider low-risk and short-term bond mutual funds.
This investment strategy focuses on minimizing risk and ensuring a stable return. These funds can provide steady income payments and can be a reliable option especially during periods of market volatility.
One of the standout performers in this category is the Beutel Goodman Core Plus Bond Fund F Series.
Beutel Goodman, a well-renowned bond fund in Canada, is notable for its low-risk strategy with a focus on average-quality bonds.
Their Core Plus Bond Fund is known for its interest rate sensitivity and its ability to offer consistent performance.
Another short-term bond fund worth considering is the Fidelity Canadian Short-Term Bond Fund F Series. This fund actively invests in short-term Canadian bonds and offers a low-risk investment option with an impressive track record of long-term performance. Managed by a professional money manager, Fidelity has consistently demonstrated their ability to provide a strong return on investment (ROI) while maintaining a balance between risk and reward.
Low-risk mutual funds such as the TD Canadian Corporate Bond Fund F Series and PIMCO Monthly Income Fund F Series are also good choices for conservative investors.
The TD Canadian Corporate Bond Fund specializes in Canadian corporate bonds, and the PIMCO Monthly Income Fund focuses on average-quality bonds. Both of these funds have shown sensitivity to interest rates, and they have a proven track record of performance, making them a reliable option for those seeking a low-risk, fixed-income solution.
4. Best Performing Technology Mutual Funds
The technology sector continues to show significant growth and potential, with many experts suggesting that investing in technology mutual funds can yield substantial returns.
These funds offer investors exposure to the sector-specific trends in tech, including software development, artificial intelligence, cloud computing, and more.
A fund that has garnered attention for its performance is Fidelity’s Technology Innovators Fund (Series F).
With the best 10-year annualized return among its peers, this fund offers medium-high risk but has proven to provide high returns.
With a Management Expense Ratio (MER) of 1.13%, it’s considered to be one of the best performing technology mutual funds in Canada.
When considering tech mutual funds, investors should also consider the fund’s holdings. For instance, companies like Nvidia, a leading force in the tech industry, are often included in these funds.
Investments in such established, large-cap companies can offer potential for significant returns, though it’s important to note that tech industry trends can also lead to market volatility.
While investing in technology mutual funds can offer great growth potential, investors should be mindful of their risk tolerances and investment goals.
With expert analysis and careful fund selection, investors can effectively leverage these funds for future growth potential.
5. Matching Mutual Funds to Your Investment Needs
Mutual funds offer an effective way to diversify your investments while accessing a range of assets typically reserved for professional money managers.
A mutual fund pools money from multiple investors to invest in a portfolio of securities, such as stocks and bonds.
With over 5,000 mutual funds available in Canada, covering various sectors of the market and carrying different degrees of risk, finding the right one that aligns with your investment needs is crucial.
Investors can find mutual funds focusing on specific sectors, such as the RBC Global Energy Fund F and the TD Resource Fund F, which provide sector-specific exposure to natural resources.
The Canoe Energy Income Portfolio Class F and Dynamic Energy Income Fund F offer unique exposure to the energy sector. These funds may suit investors seeking to tap into the growth of industrial stocks and the commodities market.
Notably, the Morningstar Global Energy Index was up nearly 30% as of Dec 16, 2022, indicating strong performance in this sector.
Investment needs can also vary based on risk tolerances. Fixed-income mutual funds such as Beutel Goodman Core Plus Bond Fund F Series and PIMCO Monthly Income Fund F Series offer conservative, low-risk investments perfect for those seeking stable income payments. Conversely, growth-oriented funds like NBI Global Equity Fund F Series and Fidelity’s Technology Innovators Fund offer potentially higher returns but with increased risk.
Ultimately, matching a mutual fund to your investment needs involves careful analysis of the fund’s past performance, fees, manager expertise, risk level, and liquidity.
Financial advisors or robo-advisors like Wealthsimple Technologies Inc can provide valuable guidance in this process.
6. Mutual Funds Fees and Comparing to ETFs
Mutual fund fees, often referred to as Management Expense Ratios (MERs), are a critical factor to consider when choosing an investment vehicle.
These fees cover the cost of managing the fund, including paying the fund manager and covering administrative costs.
However, these fees can significantly impact the return on investment (ROI) over time. The fees charged by mutual funds vary, with Fidelity’s Technology Innovators Fund (Series F) charging an MER of 1.13% while others like the Ninepoint Energy F (Series D) charge an MER of 12.33%.
While mutual funds offer professional management and diversification, they often have higher fees compared to Exchange-Traded Funds (ETFs). ETFs are investment funds traded on stock exchanges, similar to individual stocks.
Traditional ETFs are passively managed, meaning they aim to replicate the performance of a specific index rather than outperform it. This passive strategy typically results in lower fees, with traditional ETFs charging between 0.06% to 0.25%, significantly lower than most mutual funds.
Choosing between mutual funds and ETFs largely depends on your investment strategy.
If you prefer active management and are willing to pay higher fees for the potential to ‘beat’ the market, mutual funds might be the right choice.
If, however, you prefer a lower-cost, passive investment strategy, ETFs could be a better fit.
In Canada, while ETFs have gained popularity, mutual funds remain a staple investment vehicle due to their history and the ability to offer a wide variety of investment options.
As of 2022, Canada’s ETF industry had $352.2 billion assets under management (AUM) compared to the $2 trillion in mutual funds.
It’s essential to consider both investment types to ensure they align with your financial goals and risk tolerance.
7. Mutual Fund Investment Trends in Canada
The trend of investing in Canadian mutual funds has steadily increased over the years. As per recent statistics, Canadians have an estimated $1.9 trillion invested in mutual funds, making it a reliable and successful investment vehicle. The surge of investment into these funds started heavily in the early 90s when double-digit interest rates dropped, and the belief in active management to ‘beat’ the market took hold. The value of assets under management of mutual funds skyrocketed by 1,700% throughout the 90s, growing from $25 billion in December 1990 to an astonishing $426 billion by December 2001.
Many factors have contributed to this trend, one being the broad spectrum of mutual funds available in Canada, numbering over 5,000. These funds span across various sectors of the market and cater to different degrees of risk, thus providing diverse options for investors. From fixed-income mutual funds that offer a conservative, low-risk investment solution for those seeking stable income, to large-cap and small-/mid-cap mutual funds that offer higher risk but potentially greater growth potential, Canadian mutual funds cater to a variety of investment preferences and risk tolerances.
Moreover, the past decade has witnessed a surge in the use of robo-advisors like Wealthsimple. These digital platforms utilize algorithms to manage portfolios, offering a cost-effective alternative to traditional investment advice, which often comes with higher fees. The rise of technology in the finance sector, combined with a drive for more affordable investment solutions, has propelled the popularity of these services.
8. Understanding Mutual Fund Selection and Performance
Given the multitude of mutual funds available in Canada, the selection process might seem daunting for investors. However, key factors such as past performance, fees, risk, and Management Expense Ratios (MERs) should be considered before making a decision.
To evaluate a fund’s performance, investors can look at its return on investment (ROI), benchmark performance, and track record. Another crucial factor is the expertise of the fund manager and their investment strategy.
Among the top performers in Canadian mutual funds are the Mackenzie Canadian Equity F Series, Scotia Canadian Equity F Series, and RBC Canadian Equity Income Fund F Series.
These funds, along with the RBC Vision Global Equity Fund F Series, NBI Global Equity Fund F Series, Canoe Global Equity F Series, Beutel Goodman Core Plus Bond Fund F Series, Fidelity Canadian Short-Term Bond Fund F Series, TD Canadian Corporate Bond Fund F Series, and PIMCO Monthly Income Fund F Series, demonstrate a consistent performance record and stability.
For instance, the Fidelity Canadian Short-Term Bond Fund F Series is noted for its investment in short-term Canadian bonds, offering low risk with a stable long-term performance.
On the other hand, Beutel Goodman Core Plus Bond Fund F Series invests with a low-risk strategy, focusing on some interest rate sensitivity and average bond quality.
A different approach is adopted by TD Canadian Corporate Bond Fund F Series and PIMCO Monthly Income Fund F Series, which invest in Canadian corporate bonds and average-quality bonds respectively, presenting a low-risk solution with a sensitivity to interest rates and a strong track record of performance.
In conclusion, mutual fund selection should align with an individual’s financial goals, risk tolerance, and