Lesson Introduction to mutual funds

Introduction to mutual funds

Learn the basics of mutual funds and their different types.

In the simplest terms, a mutual fund is managed product that pools money from different investors for the purpose of trading securities and earning a profit. The fund’s designated portfolio managers are responsible for managing the investments within the fund on an on-going basis and with accordance to the fund’s objective. Typically, those managers possess the financial knowledge, experience, and tools required for the task and for that reason, we find many investors who are attracted to investing in mutual funds.

When you invest money in mutual funds, you’re buying units of it. These units allow you to participate proportionally in the gains or losses of the funds’ portfolio. If the securities within the overall fund increase in value, individual units will increase as well and investors earn a profit. On the other hand, if securities within the fund decrease in value overall, individual units will decrease as well and investors would incur a loss.

There are several types of mutual funds to choose from based on your risk tolerance, goals, and objectives. Generally, mutual funds fall into different categories based on the type of investments that are being traded within them:

  • Money market funds: invests in short-term, fixed-income securities such as government bonds, treasury bills, bankers’ acceptances, and commercial papers
  • Fixed income funds: invests in fixed-income securities such as government bonds, investment-grade corporate bonds, and high-yield corporate bonds
  • Equity funds: invests in equities (stocks)
  • Balanced funds: invests in a mix of equities and fixed-income securities
  • Index funds: these funds are designed to track and invest in a particular index
  • Specialty funds: these funds invest in specific industries or sectors

To trade mutual funds, follow the steps below:

  1. Log in to Questrade Trading
  2. In the top navigation menu, click MUTUAL FUNDS
  3. Visit our Mutual fund centre for your research needs
  4. Once you're ready, click BUY/SELL to make a trade

Here are some key things you should know about trading mutual funds:

  • Orders placed before 1 pm EST are processed on the same day that the order was placed. Orders placed after 1 pm EST will be queued for processing on the next business day
  • Most mutual funds have a settlement time of T+1 business day
  • The commission charge for a mutual fund is $9.95 per trade
  • Most mutual funds have a margin requirement of 50%
  • To switch mutual funds within the same mutual fund company, call our Trade Desk at 1.866.980.9590, Monday to Friday, 8 am to 4:30 pm ET

Please note: Mutual funds are sent for processing between 1 PM to 4 PM. If the fund order you have placed has a special cutoff time prior to 1 PM your order may not be processed until the next business day. To double check the cut-off time of your chosen mutual fund, please visit here. If you wish to get the same business day processing, please call into the trade desk at 1.866.980.9590 before 1 PM to request early processing.

Note: The information in this blog is for educational purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied, is made by Questrade, Inc., its affiliates or any other person to its accuracy.

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