15 Best Mutual Funds in Canada 2021: Lowest Fee Options

Have you become interested in investing in Canada? An increasing number of Canadians have started realizing the importance of investing their savings to ensure that their wealth can keep pace with the rising living costs due to inflation rates.

Letting your money sit idly in a high-interest savings account can allow it to grow, but the low-interest-rate environment provides meagre returns that cannot match the rising inflation rates.

As a Canadian investor, you have a wealth of options in terms of how you can invest your money to enjoy decent returns.

Mutual funds are a longstanding investment vehicle for many investors who don’t have plenty of knowledge about financial markets and prefer a hands-off approach to make their money work for them to earn more money.

I used to work as a financial advisor for one of Canada’s largest financial firms and for a mutual fund company. I have some reservations about mutual funds in Canada, but I also have the experience to draw from to provide you with reasonable advice regarding this financial instrument.

I have written this guide to the best mutual funds in Canada to help you identify how to make the best use of your investment capital if you are looking for a way to gain exposure to professional and actively managed investments.

Best Mutual Funds In Canada

What Are Mutual Funds?

Mutual funds are professionally managed investment vehicles that pool money from several investors and then invest the pool into a diversified basket of securities, such as stocks, bonds, commodities, debt instruments, and much more.

Each fund boasts a defined net asset value (NAV) that is derived after dividing the entire asset allocation of the mutual fund by the number of individual securities held by the fund.

Mutual funds can be classified into different categories, like equity funds, bond funds, or balanced funds that hold a mixture of both stocks and bonds. Some funds are passively managed and track a specific market index.

These passively-managed index funds do not require active decision-making from fund managers. And then there are actively-managed funds.

Fund managers who maintain the fund use the collective buying power of many investors to create diversified portfolios that would otherwise be too expensive for individual investors to create and manage on their own.

Fund managers maintain the portfolio, making adjustments to the funds’ holdings based on the fund’s objectives.

Fund managers of actively-managed funds are more involved in the decision-making process, analyzing the performance of securities held within the fund and making decisions to adjust the fund’s holdings to try to beat market indices or provide superior returns to shareholders based on the fund’s objectives.

The Problem With Mutual Funds in Canada

When you buy and hold shares of a mutual fund product, you benefit from returns provided by the assets held by the fund through capital appreciation, dividends, and more, minus the investment management fees charged by the mutual fund manager.

And therein lies one of the most significant issues with mutual funds in Canada; its extremely high fees.

I think mutual funds in Canada are overall pretty awful. You can check out this video below to understand why.

There are other low-cost alternatives to mutual funds in Canada that you can consider. However, if you insist on purchasing mutual funds because you prefer active management, this list of the best mutual funds in Canada can help you identify a few suitable investment vehicles for you to consider.

Best Mutual Funds in Canada

This section of my guide to the best mutual funds in Canada will list down the financial instruments you can consider if you are looking for actively managed financial instruments. I have divided the list into different sections.

The list includes lower-cost mutual funds, robo-advisor products that emulate mutual funds, big bank mutual funds, and a few boutique funds that qualify as actively managed financial instruments.

Vanguard Mutual Funds In Canada

Vanguard Logo Transparent

This section of my guide to the best mutual funds in Canada will cover some of the top funds provided by The Vanguard Group.

These funds offer you access to actively managed baskets of securities based on various investment objectives with a relatively lower Management Expense Ratio (MER) compared to many traditional mutual fund products.

1. Vanguard Emerging Markets Select Stock Fund

Vanguard Emerging Markets Select Stock Fund

Vanguard Emerging Markets Select Stock Fund (VMMSX) is an actively managed fund that offers you exposure to emerging markets outside the US at a relatively low cost. The fund focuses on allocating its assets to securities trading in emerging market countries, including China, Brazil, Russia, and India.

VMMSX fund is an equity fund that invests in stocks trading in emerging market countries. Stocks from these markets tend to be more volatile than those in developed countries.

The volatility comes with the possibility of substantial long-term returns but adds capital risk due to currency fluctuations and political issues affecting the performance of underlying funds.

VMMSX fund comes with an MER of 0.85%.

2. Vanguard Growth And Income Fund Investor Shares

Vanguard Growth And Income Fund Investor Shares

Vanguard Growth And Income Fund Investor Shares (VQNPX) is an actively managed mutual fund that seeks to outperform the S&P 500 Index. The fund manager uses a quantitative investment approach to emulate the performance of the underlying index with the goal of outperforming it.

The fund has a total return goal. It means that it seeks to provide you with investment returns through capital appreciation and dividend income.

VQNPX fund is also an equity fund, entailing a degree of capital risk. It comes with full exposure to the entire US stock market and it is comprised of a diverse group of large publicly-listed companies in the US.

VQNPX fund comes with an MER of 0.32%.

3. Vanguard Dividend Growth Fund

Vanguard Dividend Growth Fund

Vanguard Dividend Growth Fund (VDIGX) is an actively-managed mutual fund designed to provide you with some income while offering you exposure to dividend-focused companies across all industries.

The fund manager rebalances the portfolio to focus on high-quality and publicly listed companies in the US that commit and have the ability to grow their shareholder dividends over time.

VDIGX fund entails a relatively high degree of capital risk due to its exposure to equity securities without any assets allocated to fixed-income securities.

One of the risks associated with the VDIGX fund is that the returns from dividend-paying stocks can trail returns from the overall stock market during any given period.

VDIGX fund comes with an MER of 0.26%.

4. Vanguard Target Retirement Income Fund

Vanguard Target Retirement Income Fund

Vanguard Target Retirement Income Fund (VTINX) is an actively managed mutual fund designed for investors who are already in retirement. The fund seeks to provide you with current income and some capital appreciation by investing in Vanguard index funds.

The fund allocates assets to stocks and bonds to provide you with a more balanced approach and lower your degree of capital risk.

Investing in the VTINX fund comes with the prerequisite that you can tolerate modest share price movements and market risks that come with stock markets and bond markets.

VTINX fund comes with an MER of 0.12%, significantly lower than the average expense ratio of funds with similar holdings.

5. Vanguard Mid-Cap Growth Fund

Vanguard Mid-Cap Growth Fund

Vanguard Mid-Cap Growth Fund (VMGRX) is an actively managed mutual fund that invests primarily in publicly-listed companies in the US with medium-sized market capitalizations that the fund manager believes have strong potential for revenue and earnings growth than average mid-cap companies.

Investing in the VMGRX fund entails higher capital risk because the fund focuses on the mid-cap area in the US stock market that offers decent long-term growth potential but takes a more aggressive approach towards capital appreciation by not focusing on well-established large-cap US stocks.

VMGRX fund comes with an MER of 0.34%.

Questwealth Portfolios

questrade questwealth logo

Questwealth is a robo-advisor product that also provides you with easy access to actively-managed and hands-off investing. However, it is not a mutual fund provider. The investment platform gives you access to actively-managed and low-cost investing instead of creating your own self-directed portfolio.

I included it in this list because it is kind of like a hybrid between an active mutual fund and an ETF portfolio.

Questwealth offers five different Exchange-Traded Fund (ETF) portfolios that comprise of a combination of different securities based on varying risk tolerance levels, including:

6. Questwealth Aggressive ETF Portfolio

Questwealth Aggressive ETF Portfolio

Questwealth Aggressive ETF Portfolio is the most aggressive ETF portfolio offered by Questwealth Portfolios. The actively-managed fund focuses on allocating assets entirely to equity securities. The Aggressive ETF portfolio could be ideal for investors seeking exposure to a basket of growth-oriented equity securities.

Investing in the Questwealth Aggressive ETF Portfolio entails a significant degree of capital risk because the ETF portfolio does not diversify its asset allocation to fixed-income securities.

It can offer the highest potential return during bull markets but can cause significant losses during bear markets. The MER of the Questwealth Aggressive ETF portfolio ranges from 0.10% to 0.13%.

7. Questwealth Growth ETF Portfolio

Questwealth Growth ETF Portfolio

Questwealth Growth ETF Portfolio is an actively-managed ETF portfolio offered by Questwealth Portfolios designed to provide you with better than average asset growth. The Questwealth Growth ETF Portfolio allocates roughly 80% of its assets to equity securities and 20% to fixed-income assets.

Investing in the Questwealth Growth ETF portfolio entails slightly lower capital risk than the Aggressive portfolio. The MER of the Questwealth Growth ETF portfolio ranges from 0.10% to 0.13%.

8. Questwealth Balanced ETF Portfolio

Questwealth Balanced ETF Portfolio

Questwealth Balanced ETF Portfolio is an actively-managed ETF portfolio offered by Questwealth Portfolios designed to provide you with capital growth with a moderate degree of capital risk. Questwealth Balanced ETF Portfolio allocates 60% of its assets to equity securities and 40% to fixed-income assets.

Investing in the Questwealth Balanced ETF portfolio entails lower capital risk than the Aggressive and Growth portfolios. The MER of the Questwealth Balanced ETF portfolio ranges from 0.12% to 0.13%.

9. Questwealth Income ETF Portfolio

Questwealth Income ETF Portfolio

Questwealth Income ETF Portfolio is an actively-managed portfolio offered by Questwealth Portfolios designed to provide you with a steady and passive income stream with moderate wealth growth through capital appreciation. The fund allocates 60% of its assets to fixed-income securities and 40% to equity securities.

Investing in the Questwealth Income ETF portfolio entails lower capital risk than the Aggressive, Growth, and Balanced portfolios, offering you more consistent returns than the Balanced portfolio due to its more significant exposure to fixed-income assets.

The MER of the Questwealth Income ETF portfolio is 0.13%.

10. Questwealth Conservative Income ETF Portfolio

Questwealth Conservative Income ETF Portfolio

Questwealth Conservative Income ETF Portfolio is an actively-managed portfolio offered by Questwealth Portfolios designed to provide you with optimum capital preservation while offering you a minimal degree of capital appreciation.

Questwealth Conservative Income ETF Portfolio allocates 80% of its assets to fixed-income securities and 20% to equity securities.

Investing in the Questwealth Conservative Income ETF portfolio offers you the most stability among Questwealth’s different ETF portfolios through greater exposure to fixed-income securities.

The MER of the Questwealth Conservative Income ETF portfolio ranges from 0.13% to 0.14%, making it the costliest of the ETF portfolios offered by Questwealth.,

Big Bank And Boutique Mutual Fund Products

This section of my guide to the best mutual funds in Canada will cover some of the more traditional mutual fund products available to you in Canada. But before I get into them:

Which Bank Is Best For Mutual Funds In Canada?

Most of the major Canadian banks provide mutual fund products that you can consider investing in.

I do not prefer investing in mutual fund products provided by Canadian banks, but if I were to choose, I would prefer the mutual funds offered by the Royal Bank of Canada and Toronto-Dominion Bank. Here are some of the best mutual funds in Canada offered by big banks:

11. RBC Select Very Conservative Portfolio

RBC Select Very Conservative Portfolio (RBF664) is an actively-managed mutual fund offered by RBC Global Asset Management that seeks to provide you with investment returns through income and modest capital growth.

The fund is designed for investors who are planning to hold their investment for the medium-to-long term and prefer a lower level of involvement in investment decisions.

RBF664 fund allocates almost 70% of its assets to fixed-income funds and diversifies the rest of its assets across geographically and industrially diversified equity security funds.

RBF664 fund is a relatively expensive fund that comes with an MER of 0.85%.

12. RBC Select Conservative Portfolio

RBC Select Conservative Portfolio (RBF657) is another actively-managed mutual fund offered by RBC Global Asset Management. The fund seeks to provide you with investment returns through income and moderate capital growth.

The fund is designed for investors who plan to hold their investment for the medium-to-long term while having the ability to accept a relatively higher degree of capital risk.

RBF657 fund allocates 53.1% of its assets to fixed-income funds and diversifies the rest of its funds across geographically and industrially diversified equity security funds.

RBF657 is a costlier fund to own with an MER of 0.90%.

13. TD Dividend Income Fund

TD Logo

TD Dividend Income Fund (TDB627) is an actively-managed mutual fund offered by TD Asset Management Inc. The fund seeks to provide you with investment returns primarily through dividend income and has a secondary focus on capital appreciation.

The fund is designed for investors who seek dividends and capital gains.

TDB627 allocates 80.40% of its assets to dividend-paying Canadian equity securities and diversifies the rest of its asset allocation across various fixed-income and equity securities.

TDB627 is an expensive fund to own, with an MER of 2.03%.

14. TD Dividend Growth Fund

TD Logo

TD Dividend Growth Fund (TDB972) is another actively-managed mutual fund offered by TD Asset Management Inc.

The fund seeks to provide you with investment returns through a high level of after-tax income and steady growth by investing primarily in high-quality, high-yield equity securities and other income-generating assets listed on Canadian stock markets.

TDB972 allocates 91.10% of its assets to dividend-paying and high-yielding Canadian equity securities. It diversifies the rest of its assets across US-listed equity securities and income trusts.

TDB972 is an expensive fund to own, with an MER of 2.03%.

15. Mawer International Equity Fund

MAWER logo

Mawer International Equity Fund (MAW102) is an actively-managed mutual fund offered by Mawer Investment Management Ltd. It is a privately owned and independent investment firm managing approximately US$91 billion in assets for individual and institutional investors across all major asset classes.

MAW102 seeks to provide you with investment returns through capital appreciation by investing primarily in a basket of geographically diversified equity and equity-related securities of publicly-listed companies outside Canada and the US.

The fund’s allocation to assets in any country depends on individual company-by-company opportunities identified by the fund manager. The fund focuses on internationally diversified equity securities that the fund manager deems to have the potential to provide growth.

MAW102 fund entails a relatively high degree of capital risk because it allocates 100% of its assets to equity securities.

It is a relatively expensive fund to own, with an MER of 1.40%.

Conclusion

If you are looking for a way to invest your money through a hands-off approach managed actively by professionals, you will likely find ideal opportunities in this list of the best mutual funds in Canada.

However, the cost of investing in mutual funds is higher than with other low-cost investment vehicles with similar benefits and features. You might be better off investing in ETFs.

If you don’t like paying exorbitant management fees for investment vehicles that are not guaranteed to provide you with superior returns, you could consider investing in ETFs in Canada. Check out my list of the best ETFs in Canada to view a list of investment vehicles suitable for this purpose.

Photo of author
Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

Check Out These Posts:

Leave a Comment