Before you buy mutual funds, you must have an investment account. You can open an account at a financial institution such as a bank or investment company.
Tip for young investors: In Ontario, you will likely have to be at least 18 years of age to open an account. If you are under age 18, your financial institution may suggest that your parents open an account "in trust" for you. When you turn 18, the account can be transferred to your name
Seven steps to buy a mutual fund:
1. Work with your adviser to determine your goals and financial situation, and how much you have to invest.
2. Decide which mutual funds are the best choices for you. Be sure to ask:
- How well is this fund doing compared to similar funds?
- What looks good about the future of this fund?
- What is the current unit price? This tells you how many units you can buy with your money.
- What do experts think about owning the mutual fund?
- How much risk is there of losing some of my money?
- What fees will I pay?
- How will my adviser be paid for selling me this fund?
Tip: When you invest in a mutual fund, you buy units of the fund. Each fund requires that you buy a minimum amount (for example, $500). The number varies from fund to fund. Check the fund's prospectus for details.
3. Decide if you want to hold the fund inside or outside of a sheltered plan, such as a Registered Retirement Savings Plan (RRSP).
4. Decide how you are going to pay. Most people pay for investments from their savings. You can also borrow, but there are risks as well as benefits.
5. Complete an application. You will have to provide some personal information, such as how much risk you are willing to take, and how much you know about investments. Provincial regulations require that an adviser get this information from you before offering advice and recommendations. Sign the form and keep a copy for your files.
Tip: You can cancel your order to buy a mutual fund within 48 hours after you receive confirmation of your order. Rules vary in some provinces.
6. Soon after you buy the mutual fund, you will get information about it from the company that manages it. This is called a prospectus. You may be given a copy of the prospectus at your meeting, or it may be mailed to you. If you do not receive this information, call your adviser immediately.
7. Watch your investment. For example, read your account statement. If this is the first time you have bought a fund, ask the adviser to explain how to read your statement.
Remember: Mutual funds are not simple investments
It's important to understand the risks and the costs, as well as the return you hope to make. It's also important to follow your mutual funds closely. And, watch the fees you pay.
Learn more
To learn more about following your mutual funds, read Understanding Your Account Statement.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.
