For the purpose of accumulating wealth over a long timeframe, many Canadian investors look to a combination of mutual funds, equity funds, and Balanced Funds in consideration of growth versus stability in the investment process. With the Canadian market largely composed of banks, energy, and natural resources, selecting the right mix of funds is critical for proper diversification and risk management.
We present a list of the top 10 investment funds in Canada, from low-cost index mutual funds to actively managed portfolio allocations offered by leading firms like RBC Fund, Mawer and CI Investments. The fund names selected on the list below have all demonstrated value to Canadian investors through strong performance metrics, diversification levels, and use in RRSPs and TFSAs.
Top 10 Investment Funds in Canada to Include in your portfolio
1. RBC Canadian Dividend Fund
The RBC Canadian Dividend fund is one of the most recognized mutual funds in Canada that focuses solely on blue-chip companies that pay dividends consistently. The fund receives exposure from financial institutions, utilities, and energy firms, which makes the fund a strong Income Fund for investors who prioritize stability and cash flow.
Available in various fund codes and series, including Series A mutual fund offerings. It is a popular choice for both retail investors and those investing with an advisor. Fund Facts documents also summarize fees, risk ratings, and past performance, providing investors with clarity and transparency.
Investors value its consistent long-term performance and viability for retirement portfolios. While the fund has higher fees than index mutual funds, it offers the advantage of professional management and the opportunity to reinvest dividends.
2. TD Canadian Index Fund – e
For investors seeking simplicity, the TD Canadian Index Fund – e tracks the S&P/TSX Composite Index. It alsoprovides investors with exposure to the largest Canadian companies. TD Canadian Index Fund – e is among the most tax-efficient index mutual funds with an ultra-low management expense ratio (MER).
The TD Canadian Index Fund – e is well-suited for investors who prefer passive management. It acts as a mirror for the broader Canadian stock market. Its performance characteristics over the years have closely mirrored the Canadian equity market. Hence, this results in a stable option for cost-conscious investors.
It is especially attractive in self-directed accounts like TFSAs, where the value of saved/future costs from fees compounds over time. When comparing performance with Canadian equity funds, this Fund continues to be a smart choice for easy-to-understand, low-cost investing.
3. BMO S&P/TSX Capped Composite Index ETF (ZCN)
An affordable option for Canadian equity exposure is the BMO S&P/TSX Capped Composite Index ETF (ZCN). While some funds have their stock weightings influence a fund’s overall performance more significantly than others, ZCN puts caps on the percentage each stock can represent. This provides substantially better diversification.
ZCN is quite popular among Canadians looking for a simple, rules-based investment strategy when investing in stocks. Many Canadians track their performance summaries in ZCN and similar mutual fund alternatives because they track the same index. ZCN is expected to outperform because of a tax advantage as well as liquidity.
ZCN is often included in larger investment plans that incorporate International Equity Funds or Scotia International Equity Funds to ba;ance the equity home-country bias.
4. CI Morningstar Canada Momentum Index ETF
The CI Morningstar Canada Momentum Index ETF is a specialized equity fund that invests in Canadian companies that have shown momentum. The strategy seeks to take advantage of growth and price performance, thereby attracting a more aggressive investor profile.
The ETF will allow for investment in sectors like technology and energy. These sectors holds opportunities to grow to a greater degree more quickly.
Performance over the long run may depend on timing market cycles. However the momentum may lead to greater outperformance compared to a conventional Canadian. Although it is not an Income Fund, it can be beneficial for growth-focused portfolios. When combined for stability with Cash Equivalent Funds or bond ETFs it performs best.
5. DFA Canadian Vector Equity Fund
Dimensional Fund Advisors oversees the DFA Canadian Vector Equity Fund and emphasizes factor-based investing. This mutual fund is tilted toward small-cap and value stocks. This provides diversification often missing from the typical index mutual fund.
DFA values its evidence-based investing philosophy, which favors wide diversification, low turnover, and a systematic method for constructing a portfolio. The fund is often recommended by financial advisors who may integrate the fund in conjunction with Fidelity ClearPlan® Custom Fund Portfolios or other advanced financial planning tools.
The DFA Canadian Vector Equity Fund expands the options available to anyone interested in Canadian equity alternatives to Canadian income funds.
6. RBC QUBE Canadian Equity Fund
The RBC QUBE Canadian Equity Fund is one of Canada’s most unique Canadian equity fund structures. Typically, with a traditional mutual fund, the portfolio manager will exercise their judgment and qualitative knowledge when making investment decisions. In contrast, the QUBE fund makes investment decisions using a quantitative strategy. This is driven by algorithms and complex data models, enabling the fund to analyze thousands of variables across the Canadian market.
The systematic approach allows the fund to capitalize on opportunities that might be missed by active managers. This reduces biases in stock selection. The fund will opportunistically invest in large-cap leaders included in the S&P/TSX Composite Index. This means that the fund’s allocation will not be the same as other index mutual funds.
This positions the QUBE fund to provide investors with an active fund management approach while investing with a rules-based strategy. For investors who prefer a structured and disciplined approach, this fund’s expected return profile is generally smoother than many traditional equity mutual funds. Performance characteristics suggest less volatility than pure growth funds.
7. RBC QUBE Low Volatility Canadian Equity Fund
If you’re a risk-averse investor looking for comfort in uncertain markets, this Equity Fund is for you. Among the RBC Funds, this fund invests exclusively in companies with historically low volatility. Hence focusing on defensive sectors like consumer staples, utilities and healthcare. This defensive tilt supports protecting capital during turbulent times.
Although the fund may not beat high-growth products in bull markets. Its long-term record is appealing to retired investors, conservative savers, and others who focus on preserving wealth. This fund rides much smoother than most mutual funds, which is a stress relief in volatile markets.
As with all Canadian equity funds, investors should ensure they read its Fund Facts and fund code details. This is to ensure they understand all fees, asset mix and holdings. The QUBE fund is an often-accompanied fund alongside Income Funds such as the PH&N Fund. Together, this creates a portfolio that focuses on income production with defensive growth. For investors who prefer consistency, this style is a disciplined approach that will also have outstanding returns over time.
8. Mawer Balanced Fund (MAW104)
The Mawer Balanced Fund (MAW104) holds a well-regarded historical reputation among Balanced Funds in Canada. It generally ranks among the leaders in its Canadian Balanced fund category. This fund invests in Canadian, US, and global equities, as well as high-quality fixed-income securities, to deliver diversification in one mutual fund.
This fund provides international exposure for those investors wanting to be exposed to markets outside of Canada. Mawer’s discipline “be boring. Make money.” investment philosophy has served them well for decades. This long-term historical performance demonstrates steady compounding with below-average volatility, making it an excellent core holding for retirement portfolios.
The relatively low turnover structure in the fund also adds value for investors by reducing costs and increasing after-tax returns. The fund has attempted to add aspects of sustainable investment mutual funds for socially responsive investors. This is nessasary as as the trend towards global responsible investing is growing.
This fund is especially attractive for investors looking to combine growth and income. This is why it’s one of the best Canadian mutual fund options. You can use it with Cash Equivalent Funds for liquidity or international equity funds for broader exposure. The Mawer Balanced Fund is a tried-and-true solution for longer-term capital appreciation.
9. BlueBay Emerging Markets Corporate Bond Fund
The BlueBay Emerging Markets Corporate Bond Fund may be appropriate for investors who are looking for something beyond Canadian Equity Funds and into global fixed income. The mutual fund invests in corporate bonds issued in emerging markets which offer a yield that is higher than Canadian or U.S. bonds.
If an investor is comfortable with the dangers of investing internationally, this is a way to develop diversification outside of the standard Income Fund or Balanced Fund. Emerging markets typically have higher returns due to growth potential and spreads in credit, so the fund’s metrics/team/figures will have some pretty attractive performance over the long run.
However, when there are significant upside return opportunities, the complications that come with volatility will also increase. The potential effects of movements in currency, politics, or credit distress should always be on your mind. This fund would typically make sense for investors with longer time frames and who generally have a higher risk tolerance.
The Fund Facts clearly state the costs, holdings, and performance summaries, which are always good to review prior to investing. Many investors will utilize the BlueBay fund as a filter for growth complementary to a more stable fixed income option like the Scotia Money Market Fund or other Cash Equivalent Funds.
When investing it together in a diversified portfolio, you would get steady growth from your equity funds plus potential income from investing in debt on a global market scale.
10. AGF Global Select Series F
The AGF Global Select Series F is one of AGF’s family of mutual funds which focus on global equity opportunities. This strategy differs from regionally focused funds because it invests in leading global companies across developed and emerging markets, providing a broad geographic view. With a focus on high-quality businesses, which we view as having great fundamentals, it is a compelling choice for investors looking for growth using international equity funds.
As a Series A mutual fund alternative, the Series F class will typically offer a lower management fee for investors purchasing through a fee-based advisor. The fund code and fee structure make it even more appealing to long-term investors that are seeking global exposure with reasonable costs.
The longer-term performance of the fund has historically benefited from global diversification. This limits potential reliance on any particular economy or market sectors. Those investors who refer to the Fund Facts will truly observe a blend of sectors. Which could include technology leader and healthcare innovators, and in this regard, can be viewed as an opportunity for international diversification. For many Canadians, the AGF Global Select Series F fund, could also be combined with Balanced Funds or mutual funds for sustainable investment.
For investors wanting to look outside Canada, the AGF Global Select Series F takes a systematic, disciplined approach and focuses on global opportunities. Coupling it with income-driven assets, like the BlueBay Emerging Markets Corporate Bond Fund, can construct a portfolio that manages diversification, income generation, and growth through global assets.
Frequently Asked Questions
1. What is a Mutual Fund?
At a basic level, mutual funds are pools of funds expected to be used to make investments. The fund is pooled with your investment, along with potentially thousands or millions of other people who invest their funds.
Once the investment funds are pooled together, they are given to a fund manager, who then uses the pooled funds to buy an assortment of investment options. The majority of mutual fund managers in Canada utilise your funds to buy a variety of equities and bonds.
You are investing in dozens (or hundreds) of stocks or bonds instead of investing your money in one specific stock or bond. And you are doing this relatively hassle-free! Sounds good. A great sales pitch, right?
2. Are Mutual Funds Safe?
Mutual funds from the major Canadian banks can be considered protected (from cybercrime or fraud). But from a financial return perspective, they are definitely not safe!
3. Which are the best Canadian mutual fund companies?
Mawer and Steadyhand are the top two mutual fund companies in Canada. Generally, their managers are smarter than managers with other Canadian mutual fund companies, and they have low costs.
4. How to Assess Canadian Equity Funds Performance
When assessing the performance of Canadian equity funds, investors should examine performance over a period of time, review risk-adjusted returns, and weigh costs. Passive funds, such as index mutual funds, produce consistent performance that mimics market performance, whereas active managers may achieve better results in some phases of the economic cycle.
Performance attributes such as volatility, yield and sector exposure should be taken into account during the assessment. A performance summary tool report helps investors to evaluate a fund’s performance, such as Scotia Money Market Fund or Scotia International Equity Fund, against similar funds in Canada.
5. What are the best mutual funds in Canada over the last five years?
According to Morningstar, the six best-performing Canadian mutual funds over the last five years are:
- DFA Canadian Vector Equity Fund
- RBC QUBE Canadian Equity Fund
- BMO S&P/TSX Capped Composite Index ETF (ZCN)
- MDPIM Canadian Equity Index Pool
- CI Morningstar Canada Value Index ETF
- CI Morningstar Canada Momentum Index ETF
Conclusion
Mutual funds, ETFs, and equity funds (different investment options) come in many contexts in Canada with varying investment objectives. From dividend funds like the RBC Canadian Dividend Fund to momentum ETFs such as the CI Morningstar Canada Momentum Index ETF (and others), you will determine what works best for you.
