The term Canadian mutual funds sound confusing to some American investors. However, Canadian mutual funds are really no different than the mutual funds you find in the US, except that they are in Canada.

Mutual funds are a specific type of investment. Mutual fund companies pool the money of many investors and buy shares in several different companies. Investors have the advantage of having their money immediately diversified, and they are able to take advantage of the fact that mutual funds are professionally managed, meaning that someone is watching that fund to ensure that the companies represented in the fund are the best for the goals in the investors. Many mutual funds buy shares in publicly traded companies on the stock exchange. Canadian mutual funds often buy shares of stock on the Canadian stock exchange rather than the American stock exchange. However, you will find Canadian mutual funds that purchase shares in American companies, too. Some funds will be a mix of both Canadian and American shares; others will be solely Canadian or solely American.

Canadian mutual funds can offer all of the choices that you’ll find in mutual funds on the American exchanges, including different funds geared toward individual investment goals. For example, if you’re young and want to invest for retirement, the right mutual fund for you might be a growth fund. Growth funds typically invest in companies who are projected to have sales and revenue growth over the next few years. These companies often don’t pay dividends; rather they reinvest their earnings back into the company. These types of mutual funds, whether Canadian or American, are great for investors who want to grow their money over time, but are not concerned with receiving dividends at present. Income funds, on the other hand, are good for investors who want to receive a regular dividend payment from their investments. These mutual funds are typically invested in more stable companies, that may not be projected to grow a great deal, but that can be counted on to remain profitable.

Just like on the American market, Canadian mutual funds can be government funds, too. Government funds are those that invest in the growth of the country itself. So, buying a Canadian mutual fund that is government issued means that you are investing in the growth of Canada.  You’ll also find sector funds within the Canadian mutual funds available to you. Sector funds are simply mutual funds that buy shares in companies within a designated industry, such as healthcare, utilities or telecommunications. These funds are great for investors who have a strong belief that a certain industry will grow or is a stable industry for investment.

Canadian mutual funds can be a great way to diversify your portfolio by adding shares of Canadian companies to your holdings. Whether you’re an American investor or a Canadian investor, these mutual funds can be beneficial to helping you meet your personal investment goals. Talk to your financial advisor about the right Canadian mutual funds to help you grow your money.