open an account / buy
individual mutual funds
If your investment accounts are taxable, you should learn about investing and tax.at you expected.
Your account can be opened as a registered or taxable account.
open an account
Prepare your IDs. Financial institutions need two IDs to open investment accounts: a government-issued photo ID and proof of address. Try to bring your driver's license and passport. What if you don't have those?
You'll need to provide your SIN (social insurance number). You will be earning investment income which must be reported to the CRA (Canada Revenue Agency). They identify us by SIN.
Prepare your chequing account's banking / account information - to connect your chequing and investment accounts and make transfers between them.
You may be asked to complete a risk appetite questionnaire. Your provider will keep your answers on file and may use them to notify you of transactions that seem riskier than your risk profile suggest.
Complete the application online. What kinds of questions will you be asked?
You'll be asked if you want to sign up for a DRIP(automatic distribution reinvestment plan). There's an argument for and against it when you have a portfolio of index mutual funds.
- How does a DRIP work? When you open an investment account and fill it with index mutual funds, you'll regularly earn investment income from each fund. Every month / quarter a cash distribution will be deposited in your account. This money isn't automatically reinvested - it just sits in your account.
- A DRIP makes your distributions work for you. Instead of depositing cash in your account, your provider will automatically buy additional units of each fund in your portfolio using that fund's investment income. For example, if your Canadian bond fund earned $5 in distributions and your US equity fund $9, the bank will buy $5 worth of units of the Canadian bond fund and $9 worth of units of the US equity fund.
- You may prefer to receive cash distributions and reinvest them yourself, when you rebalance your asset mix. This is covered in KEEP UP.
With a traditional Big 5 bank you can start the process online but eventually you’ll have to visit a branch to show your IDs, unless you're already that bank's client.
buy index mutual funds
Connect / link your chequing and index mutual fund accounts.
- Login to your chequing account online and set up your investment account and its institution as a ‘payee’.
- Then do the opposite, setting up your chequing account as payee online from your investment account.
- Banks use different terminology – also look for ‘add an account’ / ‘external accounts’ / ‘transfer money in/out’.
- Test the connection with a small transfer.
Transfer money from your chequing to your investment account. You'll use it to purchase securities from your investment account online.
Place an order to buy units of the index mutual funds you've chosen to build your portfolio with, like Canadian bonds, and Canadian, US, and international equities, in the amounts that match your asset mix.
- Mutual funds are priced per unit, but you don't have to purchase an entire unit.
- For example, if the unit price of 'Canadian Equity Fund, Series D' was $25, and you paid $410, you'd receive 16.4 units.
- The unit price reflects the end-of-day prices of the stocks and bonds in the fund (it’s called net asset value or NAV).
Verify your transaction was completed correctly and you bought what you expected.