Stocks and Mutual Funds

Canada’s investment landscape is as diverse as any in the world, and the country is home to a large number of investment providers and specialists ready and able to help Canadian consumers make the most of their money. Stocks and mutual funds are some of the most popular forms of private and corporate investment, but attempting to foray into the market for the first time can seem a little overwhelming – especially for the average Canadian. Luckily there are investment firms dedicated to these asset types, and they’re who we’re going to look at in detail here.

Let’s start with a list of some of the most trusted investment companies in Canada, specializing in stocks and mutual funds. Browse the table below to see customer reviews, investment options and more.

Best Investment Companies Specializing in Stocks and Mutual Funds in Canada

Robo-advisor, Investing, Savings
0.4% - 0.5% fee, plus 0.2% for ETF purchases
Canada, USA, United Kingdom
Self Directed Investments, Pre-Built Wealth Portfolios
Self-Directed Investing: Stocks starting at 1 cent /share (min. $4.95 to max. $9.95). Pre-built portfolio: Management fees starting at 0.25%, 0.20% after $100,000
All over Canada

What’s a Stock?

A stock is an asset that represents a portion of ownership in a single, publicly-owned corporation. Units of stock are known as shares. Owning stock means that you share in the company’s profits, and as the company does well, the share price increases and the value of your investment goes up - and vice versa if the company does badly. Stocks are the staple of many people’s investments, though few people pick and choose their individual stock holdings themselves, preferring for convenience to invest in a fund that consists of a variety of different stocks.

What’s a Mutual Fund?

A mutual fund is a pool of money collected from various investors and used to purchase a portfolio of different investments. Mutual fund portfolios usually contain a broad range of asset types for diversity (including stocks), and a professional financier manages the portfolio. These are a convenient and relatively risk-averse way for people to invest, and allow those with even a small amount of money to access lucrative investments that they would otherwise be unable to afford.

Why Do People Invest in Stocks and Mutual Funds?

You might be wondering why people bother investing in stocks and mutual funds, rather than simply putting their money in a savings account and leaving it. There are actually a few reasons:

1. Performance

Historically speaking, stocks and mutual funds perform better than letting your money rest in a simple chequing or savings account. While interest rates in standard savings accounts in Canada are hovering around the 1-1.5% mark - and have not breached the 5% threshold for many years - a well managed mutual fund can expect a return of anything from 2.5% to 10%, depending on the type of fund and how aggressive it is. Similarly, stocks tend to outperform straight cash over time - although it is worth noting that stocks are more volatile than other asset types, so their better-than-cash performance is usually only witnessed over long time frames.

Data source: Wealthsimple

2. Diversification

Another good reason people turn to stocks and mutual funds is to diversify their investments. It is well known that you shouldn’t put all your eggs in one basket, and diversification is the method by which people spread their financial eggs across baskets. By either choosing many different types of stock, or choosing a mutual fund that is already well diversified, you can help to mitigate the risk of any single investment, while still gaining access to the potential upside of the assets held. Diversification is actually one of the primary reasons people choose mutual funds.

3. Convenience

Lastly, convenience comes into play. While 77% of Canadians hold some form of investment, very few have the time, knowledge or inclination to actively manage their financial portfolio. Mutual funds are very useful in this context, because you are literally paying a fee to a professional to do all of the management for you - maximizing convenience. Stocks are also a convenient form of investment if held over the long term, as very little is needed in the way of trading or management.

These are just the primary reasons that Canadians turn to stocks and mutual funds for their investments, but there are others, including cost-effectiveness, access, and risk management.

Data source: BMO

Types of Stocks and Mutual Funds

For those interested in joining their fellow Canadians in investing in stocks and mutual funds, it’s important to understand the different options available to you.


Stocks are really pretty simple if you are investing in them directly. Every individual stock relates to a specific company, so when picking stocks you need to consider whether you have a preference for a company’s:

  • Industry
  • Nationality
  • Size
  • Age
  • Past performance
  • Past volatility

You might have a specific company in mind that you are keen to invest in, or simply browse for good long term performers. You might be restricted by your budget or how many shares you want to buy. The key to buying stocks is to view it as a long term strategy, as few people (even the professionals) can be sure of any individual company’s short term performance.

Equity Based Mutual Funds

Equity-based mutual funds account for 55% of mutual funds, and they invest solely in stocks. The upside here is that the mutual fund manager does all the picking and trading of stocks for you, and should pick a selection that fits well together. People tend to choose this type of mutual fund if they don’t mind higher risk for a potentially higher payoff. Within equity funds there are many subtypes, including funds that focus on specific locations, industries, risk profiles, company size, and so on. Most equity fund investors choose a specific fund based on how much risk they are willing to accept.

Fixed Income Mutual Funds

Fixed income mutual funds invest in bonds, which pay a known, predictable rate of return. These are much more conservative vehicles than equity funds, with far less risk but correspondingly lower returns. Again, different subtypes exist, such as funds that focus on government bonds, high yield bonds, corporate bonds, and so on. These funds are favoured by those who are risk-averse.

Balanced Mutual Funds

Balanced mutual funds try to provide investors with the best of both worlds by combining both stocks and bonds to create a portfolio that offers higher returns than just bonds do, but with lower risk than pure equity holdings. Clearly the success of this type of fund depends a lot on the skill of the fund manager, whose job it is to choose the investments and balance the mix within the portfolio. It is possible to have different types of balanced fund, with some devoting a larger proportion to equities, and others to bonds.

Specialty Mutual Funds

Specialty mutual funds are exactly what you might expect - funds that focus on a special form of asset, such as property or commodities, or have specific investment priorities, such as ethical investing. The success and risk of these types of funds vary widely, and are usually favoured by those with a specific interest or concern.

Money Market Mutual Funds

Lastly, money market funds invest in short term fixed income assets, including bonds, but also encompassing treasury bills, certificates of deposit, commercial paper, and so on. These are considered a very safe form of investment, but subsequently offer a lower rate of return than most other types of mutual fund. They are best suited to those with a very conservative financial profile, and they make up around 15% of the mutual fund market.

Data source: IFIC 2020

Choosing an Investment Company

With endless stock options and over 5,000 mutual funds in Canada, choosing the right company to help you with your investments is key to making sense among all the noise. The first part of your decision is to consider how risk-averse you are, as that will help you decide what type of investment you prefer. Then you need to find companies that cater to this preference.

When considering firms to act as your investment manager, look at three key areas:

  1. Reputability, including past customer reviews and popularity.
  2. Past performance. While past performance is no guarantee of future performance, you want to choose a company that seems to know what they’re doing and has a track record of success.
  3. Fees. All money managers charge fees, and over time these can compound and become quite costly. Always examine a company’s fee structure, including performance bonuses, to make sure they are worth your business.
Source: Statistics 2020

Investing doesn’t have to be complicated or mysterious, here we break down all the major information you need about investing in Canada.

Frequently Asked Questions About Stocks and Mutual Funds

What’s the biggest mutual fund in Canada?

RBC holds four of the five biggest mutual funds in Canada. The biggest is RBC’s Select Balanced Portfolio A, which holds $37.6 billion in assets. This is not the same as it being the most successful mutual fund in Canada - just the most popular.

How much does it cost to invest in a mutual fund?

Mutual funds charge fees that typically range from 0.25-1.5% (annually) of the funds under management. These fees do make mutual funds more expensive than robo-funds, ETFs and index-linked funds, because the fees compensate the fund manager for actively managing the investments.

Are mutual funds guaranteed?

No, the funds invested in a mutual fund are not guaranteed, and there is no mechanism by which any investment company or fund manager can guarantee a certain level of fund performance.

How do I cash out of a mutual fund?

To remove your investment from a mutual fund, you must sell your shares in the fund. As these are liquid, easily transferable shares, this should be simple to do, either online or via contact with your investment company or fund manager.

Where can I trade stocks on my own?

Brokerage firms and online trading platforms exist to help regular consumers buy and sell stocks for themselves. These platforms have a range of functionalities and cost, so do your research before signing up for any.

Who regulates mutual funds in Canada?

Mutual funds in Canada are regulated by the Mutual Fund Dealers Association of Canada, and investment brokers are regulated by the Investment Industry Regulatory Organization of Canada.

Written By Smarter Loans Staff

The Smarter Loans Staff is made up of writers, researchers, journalists, business leaders and industry experts who carefully research, analyze and produce Canada's highest quality content when it comes to money matters, on behalf of Smarter Loans. While we cannot possibly name every person involved in the process, we collectively credit them as Smarter Loans Writing Staff. Our work has been featured in the Toronto Star, National Post and many other publications. Today, Smarter Loans is recognized in Canada as the go-to destination for financial education, and was named the "GPS of Fintech Lending" by the Toronto Star.