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Best Brokers for Mutual Funds

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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.

Best Mutual Fund Brokers:

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.

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 one company, other companies in a mutual fund portfolio might still do well, therefore, a mutual 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 one 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.

Pros:

  • They’re professionally managed.
  • They’re liquid.
  • You can find anything to match what you’re looking for, including risk tolerance and investment horizon.

Cons:

  • 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. “Full-service broker? Online discount broker? Which one is best?”

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:

  1. Fees. Fees aren’t the only consideration, but they should be a part of your decision-making process.
  2. 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?
  3. 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.
Commissions
$0 $6.95 for OTC Stocks
Account Minimum
$0
Best For
  • Novice investors
  • Retirement savers
  • Day traders

1. Best for Research on Mutual Funds: TD Ameritrade

TD Ameritrade offers a plethora of options for different client needs, and in the research category, TD Ameritrade doesn’t disappoint. Without excellent research capabilities, it’s not worth trading, and TD Ameritrade understands the requirements well.  Therefore, included in the full TD Ameritrade package are market highlights, analyst reports from industry-recognized third parties (S&P Capital IQ, Dow Jones and Credit Suisse). 

NTF mutual funds: No commission

No-load mutual funds: $49.99

Load: No commission

Commissions
0.30% annual fee
Account Minimum
$0
Best For
  • Retirement savers
  • Buy-and-hold investors
  • Investors looking for a simple stock trading platform

2. 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

Commissions
$4.95
Account Minimum
$0 for IRAs. Some accounts may require a minimum opening balance of $2,500
Best For
  • Easy-to-navigate yet functional platform strikes the perfect balance between expert tools and comfort for beginners
  • Mobile trading app is fully-optimized and mirrors full functionality of the desktop platform
  • Wide range of education and research options make learning more about securities and the market easier and less time-consuming

3. Best for Beginners: Fidelity

Fidelity Investments can offer over 400 analysts and a large research department; you have an automatic network at your fingertips. According to Fidelity’s website, fund managers look deeply across regions and sectors to find investment opportunities others may miss. That’s why Fidelity is great for those just beginning to venture into investing, and particularly in mutual funds.

The education and hand-holding is there, and immediately to the right on every page is a toll-free number and a “chat with a representative” option. A series of webinars and articles also allow you to learn more about mutual funds. It’s beginner-friendly and also allows you to divide up articles based on your experience level.

Commissions: $4.95 to buy (it’s $75 for some funds, but Fidelity funds are commission-free) $0 to sell ($49.95 if sold within 60 days)

Annual mutual fund low balance fee: $12 per fund Short term redemption fee: $49.95 when an NTF fund is sold less than two months after purchase

Commissions
$0
Account Minimum
$0
Best For
  • Investors who already bank with Ally and want to streamline between accounts
  • Beginners looking for easy-to-follow educational tools
  • Stock investors looking for affordable access to low-priced options and commission-free stock trading

4: Best for Low Cost Mutual Funds: Ally Invest

Ally Invest is famous for its low costs across the board (not only in the mutual fund category) and you’ll be able to choose from more than 12,000 load and no-load funds through over 500 fund families. Your goals should also be a major consideration in your decision to invest in a mutual fund with Ally.

What is your time horizon? When will you need your money? Ultimately, regardless of your goals, Ally Invest is a great choice for low cost. Across the board, the broker is well-known in the industry for low expenses.

No load purchases: $9.95

No load sale: $9.95

Load purchases: $0 Load sale: $0

Commissions
$0
Account Minimum
$0
Best For
  • 3 trading platforms perfectly in sync makes matching your platform to your skill level a snap
  • Excellent futures trading education for new traders
  • $0 account minimum means anyone can start trading

5. 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

Final Thoughts on the Best Brokers for Mutual Funds

It’s true that many mutual funds have outperformed the market for long stretches of time. However, if you’re a happy mutual fund customer, you might want to cover your eyes. According to a Standard & Poor’s research report, 92.2% of large cap active funds, 95.4% of mid-cap active funds, and 93.2% of small cap active funds have lagged behind a simple index fund that just tracks the S&P 500. A big reason for falling short is due to the mutual fund fees and the fact that some mutual funds make short term buying and selling decisions, and thus create more taxable income than a buy-and-hold strategy.

Want to learn more about mutual fund investing? Check out Benzinga’s guides to the best no-load mutual funds, the best socially responsible mutual funds and the best technology mutual funds.

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