Every mutual fund term you'll encounter in Canada, explained like a human being wrote it. No finance textbook nonsense. Bookmark this — you'll be back.
A fund manager picks individual stocks or bonds, trying to beat a benchmark index. The opposite of passive/index investing. In Canada, about 85% of actively managed funds fail to beat their index over 10 years.
Example: Fidelity Canadian Growth Company is actively managed. TD Canadian Index Fund is passively managed.
Total dollar value of money a fund manages. Bigger isn't always better, but tiny AUM (<$50M) can signal a fund at risk of being shut down or merged.
Example: RBC Canadian Dividend Fund has over $10B in AUM. That's massive.
A mutual fund that holds both stocks and bonds. The split varies — "balanced" usually means 40–60% stocks, 40–60% bonds. Popular in Canada because they're one-fund solutions.
Example: A 60/40 balanced fund holds 60% equities and 40% bonds. Most bank "portfolio" funds are balanced funds.
The index a fund is measured against. If your Canadian equity fund can't beat the S&P/TSX Composite, it's underperforming its benchmark. Most actively managed Canadian funds can't.
Canada's national self-regulatory organization for investment dealers. Formed in 2023 when MFDA and IIROC merged.
CIRO regulates the advisors and dealers who sell you mutual funds. If you have a complaint about your advisor, CIRO is where you go.
Regulations requiring dealers to send you an annual report showing fees and performance. Sounds great, but the report only shows trailer commissions — not the full MER.
It was supposed to fix fee transparency in Canada. It helped, but it didn't go far enough.
When a mutual fund sells holdings at a profit, it passes those gains to you as a taxable distribution — even if you didn't sell any units yourself. This can create surprise tax bills in non-registered accounts. Funds held in a TFSA or RRSP aren't affected.
A penalty you pay if you sell a mutual fund within a set period (usually 5–7 years). Banned for new purchases since June 2022, but many Canadians are still locked into DSC schedules from older purchases. The penalty starts at 5–6% and decreases each year.
Money a fund pays out to unitholders — could be dividends, interest, or capital gains. In a mutual fund, distributions are usually reinvested automatically unless you choose cash. In a non-registered account, all distributions are taxable in the year received.
Like a mutual fund, but trades on a stock exchange like a stock. Generally cheaper than mutual funds (0.05–0.25% MER vs 1.5–2.5% MER for bank mutual funds). The trade-off: you need a brokerage account and buy in whole shares.
TD's lineup of low-cost index mutual funds. MERs range from 0.22–0.35% — the cheapest mutual funds at any Big Five bank.
Available through TD Direct Investing or by requesting them at a branch. The closest thing Canada has to Vanguard-priced mutual funds.
See: Best TD Mutual Funds
Canada's newest registered account (launched 2023). Contributions are tax-deductible (like RRSP), and withdrawals for a first home are tax-free (like TFSA).
$8,000/year limit, $40,000 lifetime. You can hold mutual funds inside an FHSA.
A commission charged when you buy a mutual fund. Negotiable — most advisors set it to 0% because DSC was more profitable (until it was banned). Rare in practice today, but it still exists as a purchase option on some funds.
A two-page document every Canadian mutual fund must provide before you buy. Shows MER, risk rating, past performance, and top holdings.
Legally required, almost never actually read. You should read it.
A mutual fund that holds other mutual funds instead of individual stocks or bonds. Common with bank "portfolio" or "select" funds. The issue: you're paying MER on the fund of funds AND on the underlying funds (though this is disclosed as a single combined MER).
A fixed-term deposit with a guaranteed return. Not a mutual fund, but often compared to bond funds.
GICs are CDIC-insured up to $100,000. When GIC rates are high (like 4–5% in 2024), low-return bond mutual funds look especially bad.
See: GIC vs Mutual Funds
A mutual fund or ETF that holds deposits at banks and pays interest like a savings account. Examples: Purpose High Interest Savings ETF (PSA) or CI High Interest Savings Fund.
Popular for parking cash in registered accounts. OSFI rule changes in 2024 disrupted some HISA ETFs.
A mutual fund that tracks a market index (like the S&P/TSX Composite) instead of trying to beat it. Lower fees because there's no stock-picking involved. In Canada, TD e-Series and Scotia/RBC/BMO/CIBC index funds are the main options.
A registered account holding pension money you've transferred from an employer plan. "Locked in" means you can't withdraw it until retirement (with limited exceptions). You can hold mutual funds in a LIRA, but your withdrawal options are restricted.
The fee the fund company charges for managing the fund. This is NOT the same as MER — MER includes the management fee plus operating expenses and taxes. The management fee is typically 0.10–0.50% lower than the MER.
The total annual cost of owning a mutual fund, expressed as a percentage. Includes the management fee, operating expenses, and taxes (GST/HST).
This is the single most important number when evaluating a fund. Canadian bank mutual funds typically charge 1.5–2.5% MER. Index funds charge 0.06–0.80%.
A 2.00% MER on $100,000 = $2,000/year in fees. Over 25 years with compounding, that's over $150,000 in lost returns. See our MER fee calculator.
The price per unit of a mutual fund, calculated at the end of each business day. Unlike stocks, mutual funds don't trade throughout the day. You buy and sell at the NAV calculated after markets close.
A mutual fund with no purchase or redemption charges. Most mutual funds sold today are no-load (since DSC was banned in 2022). "No load" doesn't mean "no fees" — you still pay the MER.
A discount brokerage that only executes trades without providing advice. Wealthsimple Trade, Questrade, TD Direct Investing, and other online brokerages are OEO dealers. Since 2022, OEO dealers can't hold mutual funds that pay trailer fees — which eliminated high-MER Series A funds from discount brokerages.
The opposite of active management. A fund simply tracks an index — buying the same stocks in the same proportions.
Lower fees because there's no research team picking stocks. Over long periods, passive funds beat most active funds in Canada.
Automatic recurring purchases of a mutual fund. This is one of the biggest advantages mutual funds have over ETFs — you can set up automatic monthly or bi-weekly purchases of any dollar amount. ETFs require you to buy whole shares manually (though some platforms are adding fractional shares).
A registered account for Canadians eligible for the Disability Tax Credit. The government matches contributions with grants (up to $3 for every $1). Fund options are limited — many platforms only offer mutual funds for RDSPs, not ETFs.
A registered account for saving for a child's education. The government adds 20% matching through the CESG (up to $500/year per child).
You can hold mutual funds in an RESP. Group RESPs (sold by scholarship plan dealers) are different from individual RESPs — and generally worse.
See: RESP Guide
Canada's primary retirement savings account. Contributions are tax-deductible, investments grow tax-free, and withdrawals are taxed as income.
You can hold mutual funds in an RRSP. Best for people in a higher tax bracket now than they expect in retirement.
See: RRSP vs TFSA Guide
A standardized scale (Low, Low-Medium, Medium, Medium-High, High) assigned to every Canadian mutual fund based on historical volatility. Found on the Fund Facts document. A "Medium" fund has historically had annual returns swinging by about 6–16%.
An insurance product that looks like a mutual fund but comes with a capital guarantee (typically 75–100% of your deposits). Sold by insurance agents, not investment dealers.
MERs typically 2.5–4.0% because of the guarantee cost. The guarantee sounds great until you realize the fees eat your returns.
Different pricing tiers of the same mutual fund. Series A is full-price (includes trailer fee for your advisor).
Series D is for discount brokerages (lower MER). Series F is for fee-based advisors (no trailer).
Series I/O is for institutional investors (rock-bottom fees). Same fund, wildly different costs.
The cost of trading within the fund — brokerage commissions the fund pays to buy and sell securities. Separate from MER and disclosed in the Fund Facts. Usually small (0.01–0.10%), but can be higher for actively traded funds or small-cap funds.
A registered account where investments grow completely tax-free. No tax deduction on contributions (you use after-tax money), but no tax on withdrawals.
$7,000 annual limit (2024-2025). You can hold mutual funds in a TFSA. Often the best first account for most Canadians.
An ongoing fee paid from the fund's MER to your advisor or dealer every year for as long as you hold the fund. Typically 0.50–1.00% annually.
This is how bank advisors get paid for "free" advice. It's not free — it's built into your MER.
On $200K in a fund with a 1.00% trailer, your advisor earns $2,000/year from your investment — whether they talk to you or not. See: Trailer Fee Class Action
When you buy a mutual fund, you buy "units" (not shares). Each unit represents a proportional ownership of the fund's portfolio. You're a "unitholder." Functionally the same as owning shares of a stock, just different terminology.
The income a fund generates relative to its price — dividends from stocks or interest from bonds. A fund with a 3.5% yield on a $10,000 investment pays about $350/year in distributions. Not the same as total return, which includes price changes.
Missing a term? The Canadian mutual fund industry loves inventing jargon to make simple concepts confusing. If there's a term you've encountered that isn't here, it's probably designed to make fees harder to understand.
Find out what your current mutual fund fees are actually costing you.
Fee Calculator Start InvestingNothing on this site is financial advice. Terms and regulations may change — verify current information with CIRO or your fund company.
Some links on this site are affiliate links.