How to choose the right mutual funds for your financial goals

January 4, 2016

Mutual funds are a common investment option for many Canadian investors. Here’s what you need to know to choose the right funds for your financial situation and goals.

How to choose the right funds for your financial goals

Mutual funds are a common investment option for many Canadians. They can be a great choice for investors who want the benefits of a well-balanced, diversified portfolio without having to commit a large amount of time or money.

What is a mutual fund?

A mutual fund is a professionally managed pool of investments representing the contributions of many investors.

Each fund has a specific investment objective that determines the types of investments the investment manager will make. Some mutual funds invest in corporate or government bonds and some invest in Canadian or international stocks. Other mutual funds invest in a combination of stocks and bonds, while still others specialize in a specific area of the market, such as real estate or resources.

Each type of fund carries a different level of risk. In general, the higher the potential return of the fund, the higher the potential risk.

Why should I invest?

There are many benefits to investing in a mutual fund. Here are just a few:

  1. Professional advice. Each mutual fund’s holdings are chosen by professional portfolio managers based on a specific investment approach, giving you access to this expertise.
  2. Diversification. Your money is spread among many different investments, which can minimize risk and enhance returns over the long term.
  3. Lower costs/minimum investment. You can start investing with as little as $500 or monthly contributions of $25. Your trading costs will also be lower because every investor who holds a piece of a mutual fund shares these costs.
  4. Little time commitment. You don’t have to spend hours researching dozens, if not hundreds, of individual investments. The portfolio manager does that for you and chooses the right investments for the fund.
  5. Easy to buy and sell. Mutual funds can be bought and sold on any business day and are available through most banks and investment firms, either directly or through working with your financial advisor.
  6. Regular investment. If you invest a set amount at regular intervals, you can potentially buy more units of the fund when prices are low and buy fewer units when prices are high.

How do I choose the right funds?

There are thousands of mutual funds designed to suit almost every investor’s financial goals, investment time horizon and tolerance for risk.

Are you an aggressive investor who feels comfortable with risk in order to pursue higher returns? Or are you a conservative investor who prefers greater stability and can accept lower returns? Are you saving for retirement 30 years from now or to buy your first home in the next few years?

Consider these factors when deciding which mutual funds are right for you. Talk to a financial advisor, who will work with you to determine the best strategy for reaching your goals and will help you pick the right funds to get you there.

When investing in mutual funds, keep these basic principles in mind:

  • Invest for long term, rather than trying to time the markets
  • Invest early and regularly for best results
  • Reduce risk by choosing funds with good diversification or by investing in a range of funds

To learn more about how mutual funds work and choosing the right funds, visit

The contents of this Web site are provided for informational and educational purposes, and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting or tax. Please consult with your own professional advisor on your particular circumstances.

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