Ready to get started? Most Benzinga readers prefer Interactive Brokers for investing in mutual funds.
Regarding investment choices, it’s pretty safe to say that if you’re like many individuals, you’re looking for investments that can anchor you in safe waters, and at the same, can also make you lots of money. Mutual funds, if chosen carefully, can be a great way to invest and achieve both objectives.
Each investor is different, and you could be looking into a wide variety of tools and resources in a mutual fund broker. Once you know what you’re looking for, the breakdown below can serve as a helpful guide for finding a best-broker match for you based on mutual fund selection, skill level and financial situation.
1. Best Mutual Fund Capacity: Interactive Brokers
Interactive Brokers is a comprehensive trading platform that gives you access to a massive range of securities at affordable prices. You can buy assets from all around the world from the comfort of your home or office with access to over 135 global markets. Options, futures, forex and fund trading are also available, and most traders won’t pay a commission on any purchase or sale.
IBKR Mutual Fund Pricing:
- No transaction fee funds: $0
- Transaction fee: lesser of 3% trade value or USD $14.95 per transaction
IBKR is geared primarily toward experienced traders and investors. It offers 2 unique account types: IBKR Lite and IBKR Pro. IBKR Lite is aimed at lower-level traders and offers the lowest fees. IBKR Lite offers unlimited free buy and sell orders for U.S. stocks and ETFs and no inactivity fees.
IBKR Pro accounts involve low commissions and have access to Interactive Brokers’ wide range of professional market research offerings.
More to note:
- 37,000+ funds wordwide
- 34,000+ no-load funds
- Over 380 fund families
- No transaction fees on 8,300+ funds
- No custody fees
- Available globally
- IBKR is fund-agnostic
- Fund value is included with equity loans
2. Best for Versatility: E*TRADE
When you work with E*TRADE, you likely arrived there because of their commercials. You might have considered investing in mutual funds and gotten a recommendation from friends or family. Either way, the platform offers several benefits, including:
- Quality trading platform with sophisticated tools
- Several tradable assets
- Superlative customer service
- Easy mobile trading
- Helpful tutorials
- Free mutual fund trades unless the $19.99 transaction fee is noted
With a recently reimaged website, E*TRADE allows you to invest every day, save for retirement or hold assets until you plan to expand your portfolio. This opens a portal to several powerful options that help improve your financial situation:
- Simple dashboard; user-friendly and logical
- Probability calculator
- Strategy optimizer
- Continuing education for traders
3. Best Broker for Number of Options Available: Vanguard
Vanguard offers over 16,000 mutual funds from leading fund families and NTF funds. Of these funds, Vanguard has you covered across the board when it comes to varying objectives, asset classes and risk exposure. More than 2,000 are no load, no transaction fee (NTF) funds. Expense ratios are well below 0.50%, and some are even below 0.10%.
NTF mutual funds: No commission
No-load mutual funds: $49.99
Load: No commission
Transaction fee: $35 for funds that aren’t NTF mutual funds
4. Best for No Load, No Transaction Fees: Charles Schwab
A no transaction fee mutual fund (NTF) is a mutual fund that doesn’t charge trading fees. Typically, they’re bought directly from the mutual fund company or through a discount brokerage. Charles Schwab doesn’t have the most robust list of mutual funds at just over 5,000, however, the bulk of these mutual funds are transaction fee-free.
The 3,100 funds that have no load or no transaction fees actually make it one of the largest groups of no-load, no-transaction-fee funds among discount brokers. While it’s a hefty price to buy ($76, it’s $0 to sell Schwab’s mutual funds).
Commissions: $76 to buy, $0 to sell mutual fund online and automated phone short term redemption fee: $49.95
Mutual fund broker-assisted short term redemption fee: $9.95, plus $25 service charge
Mutual Funds Explained
In plain English, a mutual fund is an investment fund that pools money from many investors (including individuals, companies and other organizations) to purchase stocks, bonds and other securities. The reason for this collective approach is that this type of basket of securities (otherwise known as a portfolio) might be tough, if not downright impossible, to recreate on your own.
Just as all the currencies of the world are vastly different from one another, mutual funds can be quite different as well. Here are just a few possible mutual fund characteristics:
- Focused on long-term growth
- Focused on short term growth
- Invested in stocks
- Invested in bonds
- A mix of both stocks and bonds
Why Might I Need a Mutual Fund?
You might be an investor who’s looking for a retirement vehicle, or maybe you’ve identified your goals and you know you want a short term investment. Whatever your ultimate goals are, the biggest benefit to a mutual fund is that it’s automatically diversified. In other words, there’s less risk involved because of that giant pool of securities. If things go wrong in a company, other companies in a mutual fund portfolio might still do well, so the fund’s overall net worth, or net asset value, won’t be as negatively affected.
You also might need a mutual fund to achieve specific goals. If you’re planning on retiring at some point in your life, a mutual fund might be worth looking into. If you’ve got a short term savings goal but can’t risk losing every penny, you might look no further than a mutual fund. There are so many reasons people choose mutual funds. And to be honest, some just aren’t aware of the differences and invest in the same thing Neighbor Bob invested in last month. (A bad idea, by the way.)
Mutual Funds Compared to Individual Stocks
How are mutual funds different than individual stocks? Mutual funds can be a conglomerate of stocks, and unlike a stock, mutual funds are diversified because you’re investing in a whole bunch of stocks at once. Standalone stocks are a major risk because you’re investing in 1 versus a whole group of them.
Pros and Cons of Mutual Funds
Besides diversification, there are several other pros for mutual funds. Unfortunately, mutual funds have a few downsides as well.
- They’re professionally managed.
- They’re liquid.
- You can find anything to match what you’re looking for, including risk tolerance and investment horizon.
- Management fees can be high.
- You’re locked in (depending on the type of fund you invest in, you could be locked in for a required amount of time, like five years).
- Operating expense fees can also cause your money to take a hit.
How to Look for Mutual Funds
When it comes to research on individual mutual funds, Morningstar could be your best friend. A ticker symbol-friendly website, Morningstar can help you find new investments (and filter out all the bogus information that exists out there).
However, once you decide which mutual funds you want, you’re going to need a way to purchase them, so you need a broker. This is where a lot of questions arise, and it's important to explore your questions before you settle on a final decision.
Discount vs. Full-Service Brokerage for Mutual Funds
If you’re trying to decide between a discount or full-service brokerage, there are a few differences. And of course, it depends what you’re looking for. Brokerage accounts allow you to buy and sell stocks, bonds, ETFs and more (mutual funds are included in this list). In contrast, full-service brokers offer more products and services, including planning for retirement, tax advice, and portfolio review.
Because services are more comprehensive, typically, fees are a bit higher with full-service brokerages. If you feel you need more hand-holding, a full-service broker might be what your life is missing. However, if you crave speed and a mutual fund on the cheap, you know you’re better off with a discount broker. Here are a couple of other things to consider:
- Fees. Fees aren't the only consideration, but they should be a part of your decision-making process.
- Your goals. Your goals should also be a major consideration in your decision to invest in a mutual fund. What is your time horizon? When will you need your money?
- Load and no-load mutual funds. A loaded mutual fund typically charges a front-end or back-end load or cost, or a percentage of the amount invested, usually one to five percent. It’s a good idea to get a sense of what those fees will entail.
Find Your Best Broker for Mutual Funds
Take time to find a broker that meets your needs, and your trading process is sure to go more smoothly. There is a platforms for every investor, and each has its own unique offering of tools and resources to support you.
Get started now with 1 of our recommended brokers for mutual funds.
Frequently Asked Questions
The types of mutual funds include bond, stock, money market mutual funds and hybrid funds.