Pillar guide · investing
Best Mutual Funds Canada 2026: Low-Fee Picks (vs ETFs)
The “best mutual funds in Canada” question has a 90/10 answer: for 90% of Canadians, the answer is to switch to ETFs. For the 10% who specifically need mutual funds (employer-sponsored plans, certain advisor relationships, very specific tax situations), here are the rare ones worth holding.
The honest answer: ETFs beat mutual funds for most Canadians
The Canadian mutual fund industry is among the most expensive in the developed world. The average MER on a Canadian equity mutual fund is around 2.0% — significantly higher than the US average (~0.6%) and much higher than equivalent Canadian ETFs (0.05–0.25%).
The fee impact compounds:
| MER | Fund type | End balance | Fees paid | |
|---|---|---|---|---|
| 0.20% (XEQT ETF) | Index ETF | $735,000 | $25,000 | |
| 0.50% (TD e-Series) | Index mutual fund | $650,000 | $110,000 | |
| 1.06% (Tangerine Funds) | All-in-one mutual fund | $542,000 | $218,000 | |
| 2.00% (typical Big 5 mutual fund) | Active mutual fund | $430,000 | $330,000 | |
| 2.50% (specialty active fund) | Specialty fund | $378,000 | $382,000 |
The fee gap between a 0.20% ETF and a 2.00% mutual fund: $305,000 of lost wealth on a $100K initial investment over 30 years. That’s the cost of holding typical bank mutual funds vs equivalent ETFs.
For most Canadians, the highest-ROI single financial decision is switching mutual funds to ETFs.
The rare exceptions: low-fee Canadian mutual funds worth considering
If you must use mutual funds (employer plan, advisor relationship, no brokerage access), these are the rare ones with MERs low enough to be defensible:
1. TD e-Series Funds (0.30–0.50% MER)
The cheapest mutual funds at any Big 5 Canadian bank. e-Series are index-style funds covering Canadian equity, US equity, international equity, and bonds. Sold only by TD Bank to TD account holders.
| Fund | MER | Tracks | |
|---|---|---|---|
| Canadian Index | ~0.32% | S&P/TSX Composite | |
| US Index | ~0.34% | S&P 500 | |
| International Index | ~0.46% | MSCI EAFE | |
| Canadian Bond Index | ~0.48% | Canadian aggregate bond |
Pros:
- Available to all TD account holders without separate brokerage account
- Lowest MERs among mutual funds at Big 5 banks
- Auto-investment plans easy to set up
Cons:
- 2–3x more expensive than equivalent ETFs (XIC at 0.06%, ZSP at 0.09%)
- TD bank account required
- Bid-ask spreads buried in NAV pricing
If you’re committed to TD and don’t want a separate brokerage, e-Series is acceptable. Otherwise, switch to ETFs at Wealthsimple Trade or Questrade.
2. Tangerine Investment Funds (1.06% MER)
Five all-in-one index portfolios from Tangerine — simple, set-and-forget mutual funds:
| Fund | Equity % | Bond % | MER | |
|---|---|---|---|---|
| Conservative Portfolio | 30% | 70% | 1.06% | |
| Moderate Balanced Portfolio | 50% | 50% | 1.06% | |
| Balanced Income Portfolio | 60% | 40% | 1.06% | |
| Balanced Growth Portfolio | 75% | 25% | 1.06% | |
| Equity Growth Portfolio | 100% | 0% | 1.06% | |
| Dividend Portfolio | 100% (dividend-focused) | 0% | 1.06% |
Pros:
- Simplest possible all-in-one approach
- No rebalancing required
- $25 minimum to start
- Available to any Tangerine account holder
Cons:
- 1.06% MER is ~5x higher than equivalent ETF (XEQT at 0.20%)
- $30,000 over 30 years would lose ~$50,000 in fees vs XEQT
For investors who absolutely won’t open a brokerage account, Tangerine Funds are acceptable. For everyone else, XEQT at Wealthsimple Trade is far better.
3. RBC Index Funds and Scotia Index Funds
Both Big 5 alternatives offer index mutual funds with 0.66–0.90% MERs. Cheaper than active mutual funds but still significantly more expensive than ETFs.
Use these only if you’re locked into RBC or Scotia and won’t move to a brokerage.
Why the typical Canadian bank mutual fund is bad
Most Canadians who hold mutual funds at TD, RBC, BMO, BNS, or CIBC are in funds with 1.5–2.5% MERs. Examples (these names will look familiar):
- TD Comfort Portfolios (1.7–2.0% MER)
- RBC Select Portfolios (1.8–2.1% MER)
- BMO Select GIF (1.9–2.3% MER)
- Scotia Selected Portfolios (1.9–2.2% MER)
- CIBC Wealth Management Funds (varies, often 1.5–2.5%)
These are sold heavily through bank branches. The fee structure includes “trailer commissions” that compensate the advisor for selling the fund. This historical incentive structure is why MERs remain high — the bank/advisor model depends on these fees.
If you’re in any of these, calculate the annual fee:
- $50,000 portfolio at 2% MER = $1,000/year
- $100,000 portfolio at 2% MER = $2,000/year
- $200,000 portfolio at 2% MER = $4,000/year
Switching to a 0.20% ETF reduces these by 90%. The savings compound massively.
How to switch from mutual funds to ETFs
The mechanics:
If your mutual funds are in a TFSA, RRSP, or FHSA (registered):
- Open a self-directed account at Wealthsimple Trade or Questrade
- Initiate an in-kind or cash transfer-in from your bank
- The receiving broker can usually reimburse transfer-out fees up to $150
- Once funds arrive, sell the mutual fund (no tax in registered)
- Buy your chosen ETF (XEQT for simple, or build a 4-ETF portfolio)
- Total time: 10–14 business days
If your mutual funds are non-registered:
Same as above, but:
- Selling triggers capital gains tax on any unrealized gains
- Calculate the tax cost first (gains × your marginal rate × 50% inclusion rate)
- The fee savings typically pay for the tax within 2–4 years
- Consider transferring partially to spread the tax over multiple years
For most Canadians, the math overwhelmingly favors switching even after tax.
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My take
I held bank mutual funds from 2010–2018. After running the math myself, I switched to ETFs in 2018 and have not looked back. The annual fee dropped from ~$1,500/year to ~$100/year on the same balance.
If you have $50K+ in Canadian bank mutual funds with 1.5%+ MERs, switching to ETFs is genuinely the most impactful single financial decision you can make. The fee compound is unforgiving — every year delayed costs real money.
The “rare exceptions” mutual funds (TD e-Series, Tangerine Funds) are reasonable for users who refuse to open a brokerage account. For everyone else with $1,000+ to invest: open Wealthsimple Trade, buy XEQT, never look back.
Read next
- Best Canadian ETFs — what to buy instead
- Best Canadian dividend ETFs — for income
- Wealthsimple vs Questrade — where to open
- TFSA vs RRSP — which account to use
Frequently asked questions
Are mutual funds or ETFs better in Canada?
ETFs are better for most Canadians. Equivalent index ETFs cost 0.05–0.25% MER vs Canadian bank mutual funds at 1.5–2.5% MER. The fee difference compounds significantly: on a $100,000 portfolio over 30 years, you save $200,000+ in fees by choosing ETFs over typical bank mutual funds. The exception is if you specifically want active management and accept the higher cost.
What is a low-fee mutual fund in Canada?
Low-fee Canadian mutual funds have MERs under 0.50%. Examples: TD e-Series Funds (0.30–0.50%) — index funds available at TD; Tangerine Investment Funds (1.06%) — slightly higher but still much cheaper than typical bank mutual funds. Most Big 5 retail mutual funds charge 1.5–2.5%, which is high by 2026 standards.
Should I switch from mutual funds to ETFs?
Almost always yes, if you have access to a self-directed brokerage. The math is overwhelming: a 1.5–2.0% MER difference compounds to 30–40% of your portfolio value over 30 years. For most Canadians paying 1.5%+ MERs in mutual funds, switching to a 0.20% ETF (XEQT) is the largest single-decision wealth boost available.
Are TD e-Series Funds still worth it?
TD e-Series remains a reasonable choice for investors who already bank at TD and want index-style mutual funds without opening a separate brokerage. MERs (0.30–0.50%) are competitive among mutual funds but ~2–4x higher than equivalent ETFs at Wealthsimple Trade or Questrade. For convenience-focused investors at TD, e-Series is fine; for cost-optimization, ETFs win.
What are Tangerine Investment Funds?
Tangerine Investment Funds are five all-in-one index portfolios (Conservative, Moderate, Balanced, Equity Growth, Dividend) with a 1.06% MER. They're simple — buy one fund and hold for years without rebalancing. The 1.06% MER is meaningfully higher than ETF equivalents (XEQT at 0.20%), so the convenience comes at a real cost over decades.
Why do Canadian bank mutual funds have such high fees?
Canadian regulation has historically allowed embedded commissions (trailer fees) in mutual funds — banks pay advisors a portion of the MER for selling the fund. This created an incentive for banks to push mutual funds with high MERs. Recent regulation (CSA's mandatory disclosure rules) has improved transparency but legacy MERs remain high at most Big 5 banks.
What is a good MER for a Canadian mutual fund?
Under 0.50% is excellent for any mutual fund. Under 1.00% is acceptable. 1.00–1.50% is high but tolerable for specialty/active funds. Above 1.50% is hard to justify when equivalent ETFs cost 0.05–0.25%. The Canadian mutual fund average is around 2.0% — almost universally too expensive.
Can I have mutual funds in a TFSA?
Yes, mutual funds can be held in TFSAs, RRSPs, FHSAs, and non-registered accounts. The account type doesn't affect fee structure — a 2% MER mutual fund in a TFSA still costs 2% per year. TFSAs benefit you most when held with low-fee investments where the tax-free growth isn't eaten by fees.
Are mutual funds insured by CIPF?
Mutual fund accounts at Canadian dealers (banks, brokerages) are CIPF-insured up to $1 million per account category in case of broker insolvency, similar to ETF accounts. CIPF doesn't cover market losses, fees, or fund-level issues — only missing securities at the broker.
Should I sell my mutual funds and buy ETFs?
Generally yes if held in a registered account (TFSA, RRSP, FHSA) — there are no tax consequences to selling. For non-registered accounts, factor in capital gains tax on the sale. The fee savings typically outweigh the one-time tax cost within 2–4 years for most investors. For complex situations, consult a fee-only financial planner.
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