Danielle Kubes is a trained journalist and investor who has written about personal finance for the past six years. Her writing has been published in The Globe and Mail, National Post, MoneySense, Vice and RateHub.ca. Danielle writes about investing and personal finance for Wealthsimple. She has a Bachelor of Humanities from Carleton University and a Master of Journalism from Ryerson University.
Mutual funds offer investors the chance to simplify and diversify their portfolio, but they come at a steep price. Investors pool their money together to gain better purchasing power and then hand over the cash to a fund manager, who is in charge of picking and trading securities. That comes at a high cost which makes ETFs and robo-advisors a popular (potentially better) alternative to mutual funds.
The theory goes that because there’s so many securities bundled into a single fund (and someone with a finance degree is doing the choosing and rebalancing), a mutual fund can be a stand-in for an entire portfolio and an easy way for investors to grow money.
There are hundreds of different kinds of mutual funds available and all vary tremendously according to different risk levels, different market sectors. Which mutual funds are best? That’s for you to decide. We’ve combined a list of the biggest funds in various categories. But bigger is not always better. There are a number of things you might consider looking at to make your decision from performance to fees—the list is endless! The mutual fund information in each table is correct as of May 2020.
Wealthsimple Invest is an automated way to grow your money like the world's most sophisticated investors. Get started and we'll build you a personalized investment portfolio in a matter of minutes.Best mutual funds by risk level
Our version of “best” is defined purely by assets under management (AUM), or the amount of money inside the fund. We rounded down the net assets in millions (M) or billions (B), according to information gathered in May, 2019. We included management fees as available.
The first step in choosing any investment is to first discover your personal risk tolerance. The general rule is that the greater the risk of losing the money the greater opportunity for growth. The lower the risk of losing money the less chance for growth. Your personal risk level depends on various factors including how old you are, your tolerance for losing money and your investment goals. Since interest rates are at historic lows in order to get a return that will beat inflation it’s almost certain you’ll at least have to invest in a balanced or growth fund, which usually have a mix of bonds and stocks. But if you’re closer to, or in, retirement, then preservation of capital may be your greatest concern, in which case a conservative fund that mostly invests in bonds could be right for you.
| Fund Name | Risk Level | Net Assets | 1 Yr Return | 3 Yr Return | 5 Yr Return | Management Fee |
|---|---|---|---|---|---|---|
| RBC Select Conservative Portfolio A | Conservative | 24B | 3.55% | 2.71% | 3.23% | 1.59% |
| RBC Select Very Conservative Port A | Conservative | 11B | 4.03% | 2.67% | 2.91% | 1.45% |
| RBC Select Balanced Portfolio A | Balanced | 27.5B | 3.22% | 3.16% | 3.91% | 1.67% |
| TD Comfort Balanced Port - I | Balanced | 8B | 2.03% | 1.74% | 2.53% | 1.60% |
| RBC Select Growth Portfolio A | Growth | 8B | 2.87% | 3.25% | 4.19% | 1.76% |
| Scotia Partners Growth Portfolio | Growth | 3B | 2.28% | 2.84% | 3.92% | 2.05% |
Best fixed income mutual funds
Fixed income mutual funds are conservative, low-risk investments. They work well for those looking for stable income instead of growth and usually invest in debt rather than stocks. But since bond yields are currently so low any income will be limited, and you may even lose money since the management fee may exceed the entire return. The top 10 holdings of all the funds listed below are other bond mutual funds. It’s common practice for mutual funds to invest in other mutual funds, but this actually compounds the fees. Not only are you paying for your own management fees to select and trade the mutual funds securities, but the return of securities themselves is dampened by their own management fees.
| Fund Name | Description | Net Assets | 1 Yr Return | 3 Yr Return | 5 Yr Return |
|---|---|---|---|---|---|
| RBC Bond Fund O | Canada Fixed Income | 19B | 8.21% | 4.71% | 4.41% |
| TD Canadian Bond Fund - O | Canada Fixed Income | 13B | 7.15% | 4.45% | 3.90% |
| RBC Global Corporate Bond Fund O | Global Fixed Income | 11.5B | 5.94% | 4.08% | 4.31% |
| TD Canadian Core Plus Bond - O | Canada Fixed Income | 11.5B | 6.29% | 4.09% | 3.85% |
| PH&N Bond Fund O | Canada Fixed Income | 10B | 8.35% | 4.58% | 4.12% |
Best large market cap mutual funds
Large-cap mutual funds invest in huge, profitable companies. These companies have an excellent track record and are established in their field. But because they’re already so established their future growth potential is limited. These mutual funds are medium- to high-risk because no matter how big a company is it can still fail. Strong large-cap companies can also provide significant income since many pay dividends… Which fund is right for you depends on how much exposure you’d like outside of Canada. For true diversification and greater growth potential it’s prudent to invest additionally in the United States, and perhaps in Europe or Asia. That’s because most large-cap Canadian companies are concentrated in only three industries: oil, utilities, and financial services. To get exposure to high-quality consumer goods or technology companies you’ll probably have to look outside the country.
| Fund Name | Description | Net Assets | 1 Yr Return | 3 Yr Return | 5 Yr Return |
|---|---|---|---|---|---|
| RBC European Equity Fund O | Europe Equity Large Cap | 7B | 6.36% | 2.29% | 4.01 |
| RBC Canadian Dividend Fund A | Canadian Equity Large Cap | 7B | -10.95% | -0.84% | 1.88% |
| PH&N US Multi-Style All-Cap Equity Fd O | US Equity Large Cap Blend | 6.5B | 10.48% | 9.07% | 10.3 |
| RBC Canadian Dividend Fund O | Canadian Equity Large Cap | 6B | -9.38% | 0.90% | 3.66% |
| Mawer International Equity Series O | Global Equity Large Cap | 5.5B | 5.89% | 4.82% |
Best mid/small market cap mutual funds
Mid and small-cap mutual funds offer greater growth potential. Of course, with that comes risk. Since the companies are not yet established they could easily fail. You’ll need a fairly high risk tolerance to invest in the funds below.
| Fund Name | Description | Net Assets | 1 Yr Return | 3 Yr Return | 5 Yr Return |
|---|---|---|---|---|---|
| EdgePoint Global Portfolio Series F | Global Equity Mid/Small Cap | 3B | -10.78% | 1.03% | 4.83% |
| EdgePoint Global Portfolio Series A | Global Equity Mid/Small Cap | 2.5B | -11.79% | -0.11% | 3.64% |
| Mawer Global Small Cap Series O | Global Equity Mid/Small Cap | 2B | 8.96% | 9.90% | 11.07% |
| Mackenzie US Mid Cap Growth Cl F | US Equity Mid Cap | 1B | 1.59% | 9.27% | 10.60% |
| Mawer New Canada Series O | Canadian Equity Mid/Small Cap | 1B | 5.36% | 4.43% |
Best real estate mutual funds
Real estate offers a significant layer of diversification because it’s a completely separate asset class from stocks and bonds and represents something tangible: land. Real estate can provide both growth and income at a medium risk level.
| Fund Name | Description | Net Assets | 1 Yr Return | 3 Yr Return | 5 Yr Return |
|---|---|---|---|---|---|
| Signature Global REIT A | Real Estate Sector Equity | 350M | -3.47% | 3.13% | 3% |
| Russell Inv Global Real Estate Pool O | Real Estate Sector Equity | 350M | -10.83% | 0.97% | 3.29% |
| Scotia Private Real Estate Income Pool | Real Estate Sector Equity | 350M | -8.21% | 3.26% | 6.08% |
Best emerging market mutual funds
The emerging markets offer high risk and a potentially high reward because they invest in countries that are still developing infrastructure and financial markets. Brazil, Russia, India, and China are popular destinations for emerging market mutual funds. Not only should these be very long term holds (as should, arguably, all investments) you must accept a certain level of volatility.
| Fund Name | Description | Net Assets | 1 Yr Return | 3 Yr Return | 5 Yr Return |
|---|---|---|---|---|---|
| RBC Emerging Markets Equity Fund O | Global Emerging Markets Equity | 4B | -3.82% | 2.09% | 5.08% |
| Fidelity Emerging Mkts Portfolio Sr O | Global Emerging Markets Equity | 2B | 5.54% | 6% | 7.93% |
| BlueBay Emerging Markets Corp Bd O | Emerging Markets Fixed Income | 1.5B | 5.66% | 4.47% | 6.76% |
History of mutual funds in Canada
Canadians started investing heavily in mutual funds when double-digit interest rates dropped in the early 1990s and investors sought higher returns. The thinking was that active management could “beat” the market.
Mutual funds were the fastest growing financial product during the entire ‘90s with the value of assets under management increasing by 1,700% during that decade, from $25 billion in December 1990 to $426 billion by December 2001. That money was spread out across about 1,800 different mutual funds. Today there are more than 5,000 mutual funds in Canada.
Mutual funds versus ETFs
The mutual fund industry experienced its first major competition when exchange traded funds, or ETFs launched in Canada.
Vanguard, one of the most in-demand and lowest-cost ETFs companies entered the Canadian market in 2011, and since then sales of ETFs have outpaced those of mutual funds.
Traditional ETFs are passively managed and don’t seek to beat the market – instead they hold the same basket of securities as the index they’re following and use that index as a benchmark to measure their performance. Matching the benchmark performance is the goal. Most traditional ETFs charge between 0.06 to 0.25%, two percentage points lower than most mutual funds.
Read more: Other differences between mutual funds and ETFs are well explained here.
ETFs far fewer assets under management than mutual funds. Canada’s ETF industry has about $170 billion AUM in 2019 compared to the $1.5 trillion stashed in mutual funds.
One reason is because mutual funds have been around for so much longer.
Steve Geist, president of CIBC Asset Management Inc told the National Post, why he thinks Canadians still invest so much in mutual funds despite the high cost and low relative performance:
“The fact of the matter is that fear is driving the decisions of many investors…As a result, they have stopped taking an objective look at their investment options.”
But the bigger reason is that most Canadians still walk into their neighbourhood branch of one of the big five banks when they’re looking to invest. The investment “advisers” at these banks get a commission from selling mutual funds and are often prohibited from selling ETFs because they are licensed by the Mutual Fund Dealers Association. The rest are accredited through the Investment Industry Regulatory Industry of Canada and are allowed to sell ETFs and individual stocks but have a conflict of interest because these products rarely earn them a commission.
While the banks title these people “advisers’ they are, in fact, salespeople. They have no fiduciary responsibility to their clients and are encouraged to sell in-house financial products.
Many of the most popular equity, dividend, and balanced mutual funds in Canada have identical top 10 holdings.
Still, despite the high fees and other drawbacks millions of Canadians still prefer to put their money in a mutual fund.
Last Updated April 25, 2022
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