​​If you have taxable accounts, you'll need to learn about investing and tax.

keep up with your index mutual funds

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 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 index mutual funds, or the bank where you have your chequing account to set them up.
  • Either way, ask the bank for help if you're not sure how to do it.  

follow your budget - add money regularly

You'll invest new money by buying additional units of your funds. You can do it anytime.

  • You have no transaction cost and providers allow small increments, as small as $25.

​Use this opportunity to rebalance your portfolio.  

  • Over time the value of your index mutual funds changes - some funds make money, some may lose money, and not all prices rise / fall at the same rate. As such, your asset mix changes over time.
  • Rebalancing brings your asset mix back to its original proportions. It's convenient to get it done as you add new money to your account - it may not be necessary every time.
  • How to rebalance a portfolio.

Key takeaway: Most of the time rebalancing once a year is just fine, right after you looked at the investment performance of your portfolio.  But because index funds have no transaction fees, you can rebalance more often than once a year, when you're adding new money. It's especially important to rebalance if your index mutual funds' prices moved significantly or your asset mix has gotten out of whack.

what if your provider goes out of business?

​Mutual fund accounts are insured by the Mutual Fund Dealers Association Investor Protection Corporation (MFDAIPC).

  • The 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.

​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:

  • Have your index mutual funds 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 prices of your funds are a good place to start.

  • Check the current price of your funds 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).  If you sell at a lower price than you bought, it's a capital loss.
  • Capital gains / losses don't 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 the total return performance of your funds.  Look online for funds similar to yours - by market, like Canadian bond fund or US equity fund. Consult our research tables and find funds / ETFs with a similar asset mix from a different provider.  You're looking for the fund's page on the provider's website - total returns will be reported for various periods, from 1 to 10 years.

  • ​​Your provider will most likely calculate the investment performance of your individual funds, but probably won't provide a measure of performance of your entire portfolio.

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 and RRSP, you won't pay income tax until you withdraw money. Because of this, you need to plan before you withdraw.