at the beginning
Make sure you've set up pre-authorized transfers (if your account set-up allows it).
- Money from your chequing account will be regularly added money to your investment account.
- You may have already arranged it when filling out your application
- If not, check if you need to call the bank from which you're buying the mutual funds, or the bank where you have your chequing account to set them up.
- Either way, ask for help if you're not sure how to do it. You are paying an annual fee on your portfolio fund so expect some assistance.
follow your budget - add money regularly
You'll invest new money by buying additional units of your portfolio index mutual fund. You can do it anytime.
- You have no transaction cost and providers allow small increments, as small as $25.
Once a year
Monitor your account, but not too frequently. Once a year at least, every month may be too often - remember, these are long-term investments. Always check the following:
- Has the index mutual fund paid distributions as expected?
- Are your pre-authorized transfers going through as expected?
- Are you charged the correct fees? Any there unexpected fees?
How is your investment doing?
The unit price of your fund is a good place to start.
- Check the current price of your fund and compare it to your purchase price.
- This becomes more relevant when you're closer to cashing out. When you sell at a higher price than you bought, you make money (called a capital gain). When you sell at a lower price than you bought, it's a capital loss.
- Price does not account for distributions you've received.
Total return measures how your investment has done over a period of time, usually a year.
- It considers both distributions and capital gains / losses (changes in price).
- Capital gain / loss is calculated as if you bought the fund a year ago and sold it today. Unless you actually sell the investment, the difference between those two prices is called 'paper capital gain / loss'.
- Your total return for that year is the paper capital gain / loss plus distributions. It is expressed as a percentage (distributions and gain / loss, divided by the amount you started the year with) - the higher the better.
- Total return is reported after the MER is paid.
Check your fund's performance. Compare your portfolio index mutual fund's total return. Look online for funds similar to yours. Consult our research tables and find funds with:
- A similar asset mix, from a different provider.
- A different asset mix, from your provider.
You need to assess if your asset mix is still appropriate. Your risk appetite and investment horizon may have changed (perhaps you need the money sooner or can't afford any short-term losses).
- Make it a goal to think about your investment strategy once a year.
- Always reassess your strategy whenever your financial / personal circumstances change.
If you opened a TFSA, you won't pay income tax.
If you opened a RESP or RRSP, you won't pay income tax until you withdraw money. Because of this, you need to have a plan before you withdraw.
what if your provider goes out of business?
Mutual fund accounts are insured by the Mutual Fund Dealers Association Investor Protection Corporation (MFDAIPC).
- This insurance covers shortfalls in the value of account holdings if the institution goes bankrupt.
- If your mutual fund declines in value, this insurance won't cover it. That is investment risk.
- The coverage for all your taxable accounts, combined, is $1 million. They share the same insurance.
- The coverage for each registered account you open is $1 million.
If you have taxable accounts, you'll need to learn about investing and tax.