Mutual Fund Basics
A mutual fund is a pool of money from thousands of investors, invested by a professional manager according to a stated mandate. When you invest, you buy units of the fund; the price of one unit is the fund's net asset value (NAV) — total assets minus liabilities, divided by units outstanding — calculated once per business day after markets close.
How you make money
- Distributions — the fund passes through interest, dividends and realized capital gains, usually monthly, quarterly or annually. Most investors reinvest these automatically in new units.
- Capital appreciation — the NAV rises as the fund's holdings rise. You realize the gain when you sell units.
What's in the box
Every fund publishes a Fund Facts document (4 pages, mandated by Canadian securities regulators) showing what it holds, its risk rating, past performance and — critically — its costs. Read it before you buy. By law your dealer must deliver it.
The people involved
- Fund manager — the company running the fund (RBC GAM, Fidelity, Mackenzie…)
- Portfolio manager — the human(s) picking the investments.
- Dealer & advisor — the firm and person who sells it to you, regulated by CIRO (the Canadian Investment Regulatory Organization).
- Custodian/trustee — holds the assets separately from the manager, so a fund company failure doesn't take your money with it.
Series matter (a lot)
The same fund is sold in multiple series with different costs: Series A bundles advisor compensation into the fee; Series F strips it out for fee-based accounts; Series D is discounted for DIY investors at discount brokers. Same portfolio, very different long-run results. We cover the dollars in Fees & MERs.