Updated: April 2025 | bremo.io financial guides

ETF vs Mutual Fund Canada 2025 — Which Is Better?

No fee everyday banking

Set up direct deposit and skip the monthly fee. Free to open, and the Easy plan has no monthly fee. Worth doing if you will actually move your pay or your CRA deposits over, not if the card sits unused. Code BREMO2026.

See how it works

Canadians collectively hold hundreds of billions of dollars in mutual funds — often paying management fees of 1.5%–2.5% annually. Yet low-cost ETFs offer nearly identical or better diversification for a fraction of the cost. Understanding the difference is one of the most valuable pieces of financial knowledge a Canadian investor can have.

What They Are

Mutual funds pool money from many investors to buy a portfolio of securities. A fund manager makes buy/sell decisions (active management) or the fund tracks an index (passive). Sold through banks, advisors, and fund companies.

ETFs also pool investor money into a portfolio, but trade on a stock exchange like a share throughout the day. The vast majority of popular Canadian ETFs are passive index trackers.

The Fee Gap Is Enormous

Average Canadian equity mutual fund MER: 1.5%–2.5%

All-in-one ETF MER (VGRO/XGRO): 0.20%–0.24%

Annual fee difference on $100,000: $1,300–$2,300 per year

On a $200,000 portfolio over 20 years at 7% gross return, the difference between a 2% MER mutual fund and a 0.20% ETF is approximately $285,000 in additional wealth — from the same underlying market returns.

Performance Comparison

The SPIVA Canada report consistently shows that the majority of actively managed Canadian mutual funds underperform their benchmark index over 5, 10, and 15-year periods after fees. This isn't a surprise — it's mathematically difficult to overcome a 1.5%+ annual fee disadvantage through stock selection.

Why Canadians Still Own So Many Mutual Funds

Bank advisors are often compensated by mutual fund trailer fees (embedded commissions)
Mutual funds can be bought in dollar amounts; ETFs require whole shares
Many investors don't know ETFs exist or how to buy them
Perceived convenience of having an advisor handle everything

When Mutual Funds Make Sense

Workplace savings plans (DPSP, group RRSP) that only offer mutual funds
Investors who genuinely won't manage any account independently
Certain niche funds with no ETF equivalent

Making the Switch

If you have mutual funds at a bank and want to switch to ETFs, you typically need to sell the mutual funds (check for redemption fees or deferred sales charges) and transfer the proceeds to a discount brokerage to buy ETFs. Switching inside a TFSA or RRSP triggers no immediate tax. Switching inside a non-registered account may trigger capital gains.

Free Banking While Your Money Grows

KOHO offers free banking with no monthly fees. Use code BREMO2026 for a bonus when you sign up.

Open KOHO Free — No Fees — Code BREMO2026