8 Best Online Brokers For Mutual Funds 2023

They know you want to buy a mutual fund to help plan your retirement or some other big goal. However, deciding where to buy this type of mutual fund can be overwhelming.

First things, personal finance experts recommend buying funds directly from mutual fund companies rather than through an intermediary account. Why? You save money on expenses.

The exception, of course, is if this intermediary account is managed through a mutual fund company.

For example: buy Fidelity funds from Fidelity Investments and Vanguard funds from The Vanguard Group, etc.

Then you want to know what tools the broker offers – what mutual funds are on their platform, what fees the broker has, including the initial redemption fee and other factors.

In terms of costs, expect a higher expense ratio for actively managed accounts managed by individuals or groups of individuals who choose investments and try to beat the market, compared to index funds designed to track specific market outcomes.

What is a mutual fund?

Mutual funds are a way to engage in a larger investment portfolio that is shared with other investors. Mutual funds invest in many different companies, sometimes hundreds or even thousands of companies.

By purchasing a unit of funds, you own a stake in all investments. Therefore, mutual funds offer you diversification and reduced risk compared to buying multiple stocks.

Mutual fund stock prices change based on the net asset value of their ownership. As its shares or other assets increase, so does the value of the Fund.

The net asset value is calculated after the end of each market day and only then can investors buy and sell funds.

The mutual fund calculates its service fee ratio. This fee includes fund administration costs and the fund management company profits.

You can buy and sell funds from any broker you like, although a family of funds like Vanguard may not always be featured on all broker platforms.

Here are the best online mutual fund brokers:

• Fidelity Investments
• Charles Schwab
• E-Trade Financial
• Ally Invest
• The Vanguard Group
• TD Ameritrade
• Interactive Brokers
• Merrill Edge

Fidelity Investments 

Fidelity Investments launched four free funds in the summer of 2018. This made Fidelity Investments the first financial company to offer free investment funds in the ongoing price war.

These funds are Fidelity Zero Total Market Index Fund, Fidelity Zero International Index Fund, Fidelity Zero Large Cap Index Fund, and Fidelity Zero Extended Market Index Fund.

All Fidelity funds are free of transaction fees as long as you hold the funds for at least 60 days.

The Boston-based retirement giant, which has a long-standing presence in the mutual fund space, also offers more than 3,500 mutual funds with no transaction fees.

The long-established broker gives you access to many studies, review tools, and mutual funds of the same name, such as the legendary Magellan fund.

You can also manage all your financial accounts using the full view feature to see all your finances in one place, just like you can use in budget apps like Mint.

• Minimum amount to open an account: $0
• Standard pricing: Free for Fidelity funds and other non-transaction-fee funds, and $49.95 on the buy and $0 to sell on non-Fidelity transaction-fee funds
• Mutual fund highlight: Offers four zero-fee index funds, more than 3,400 no-transaction-fee mutual funds

Charles Schwab

Charles Schwab was recognized as an innovative, low-cost investment in the 1970s, and the company’s prices remain competitive to this day.

At Charles Schwab, you have a variety of mutual funds without commissions to choose from – more than 4,200 free and free mutual funds.

However, it will cost you a fortune if you go over these funds: brokers usually charge $ 49.95. Like many competitors,  Charles Schwab does not require a minimum amount to open or start an account.

Schwab’s excellent customer service, stable broker platform, and lots of research make it a solid choice. 

• Minimum amount to open an account: $0
• Standard pricing: $0 on non-transaction-fee funds; otherwise $49.95 when buying other funds
• Mutual fund highlight: More than 4,200 no-load, no-transaction-fee mutual funds

E-Trade Financial

 E-Trade provides more than 4,500 free investment funds. This list includes more than 120 Vanguard funds from one of the cheapest leaders in space.

If you exit these funds with no transaction fees, E-Trade charges a commission of $ 19.99, a price that’s in the middle of the competition.

At E-Trade, you also have access to research and tools to help you make investment decisions. By reviewing E-Trade, you can quickly find what you are looking for and look for funds in terms of costs, productivity, profitability, and many other categories.

Click the fund link for detailed information on that, including top stocks, annual fees, and performance.

• Minimum amount to open an account: $0
• Standard pricing: $0 on no-transaction-fee funds, and $19.99 on no-load, transaction-fee funds
• Mutual fund highlight: More than 4,600 no-load, no-transaction-fee mutual funds

Ally Invest

Ally Invest offers access to more than 12,000 mutual funds. While its standard commission on mutual funds is considerably cheaper than some other competitors, the broker doesn’t offer no-transaction-fee funds.

Instead, it charges a flat $9.95 to buy and sell no-load mutual funds, while funds with a sales load can be bought and sold for as cheap as $0.

As a financial institution without branches, Ally focuses a lot of its attention on its digital experience. Ally Invest’s sister brand, Ally Bank, wins many accolades, including Bankrate’s top online bank. The company is also well-regarded for its customer service.

• Minimum amount to open an account: $0
• Standard pricing: $9.95 on no-load funds
• Mutual fund highlight: The mutual fund commission is cheaper than many of its rivals

Vanguard

Formed in 1975, The Vanguard Group has long been celebrated for its low-cost index funds.

Its legendary founder, the late John C. Bogle, is credited with launching the first index fund for retail investors. That fund is now called the Vanguard 500 Index Fund.

As a Vanguard client, you won’t pay transaction fees for any of the 130 Vanguard mutual funds. The firm also offers more than 3,000 no-transaction-fee mutual funds for non-Vanguard funds.

You’ll pay $8 to $20 per trade for the other funds available on its platform, though accounts with more than $1 million in Vanguard funds receive their first 25 trades for free.

Even though it is known for index investing, Vanguard also offers actively managed funds.

• The minimum amount to open a brokerage account: is $0
• Standard pricing: Free for family funds and other no-transaction-fee funds; $0-$20 for others, depending on Vanguard assets
• Mutual fund highlight: Long regarded for its low-cost index funds

TD Ameritrade

With more than 4,100 mutual funds available without a transaction fee, TD Ameritrade allows investors excellent access to a range of no-cost choices.

The broker’s screening tool will help you sift through this wealth of funds, though it’s not as helpful at separating the wheat from the chaff as it could be.

However, each fund’s page does offer a comprehensive view of the security, including performance data across multiple periods, top holdings, and other critical fund information.

Still, TD Ameritrade’s premier list screen does help you narrow your focus to low-cost no-fee mutual funds by using Morningstar’s data, which is updated quarterly.

If you’re looking for a wide selection of other investment types, TD Ameritrade has you covered, too. Besides the usual run of stocks, bonds, and funds, the broker has futures and forex, for a well-rounded offering.

(Charles Schwab has purchased TD Ameritrade, and will eventually integrate the two companies.)

• The minimum amount to open a brokerage account: is $0
• Standard pricing: $0 on no-transaction-fee funds and load funds; otherwise, $49.99 for no-load funds
• Mutual fund highlight: More than 4,100 no-load, no-transaction-fee mutual funds

Interactive Brokers

It can be easy to forget that Interactive Brokers, which typically caters to more advanced traders and professionals, also offers something more popular among regular investors – a whopping 8,300 funds with no transaction fee!

That’s among the 34,000 no-load funds offered overall, while the costs for other fee funds are up to $14.95 per trade and international fee funds cost 4.95 euros or the equivalent.

The broker expanded its mutual-fund platform in 2020 and now offers the largest single place for investors to find no-load mutual funds.

That’s on top of the ability to trade in 31 countries in a range of asset classes (stocks, bonds, and more), making Interactive Brokers a true “go anywhere” broker.

• The minimum amount to open a brokerage account: is $0
• Standard pricing: $0 for no-transaction-fee funds; otherwise, 3 percent of the purchase value, up to $14.95
• Mutual fund highlight: More than 8,300 no-transaction-fee mutual funds

Merrill Edge

Merrill Edge offers more than 2,000 no-transaction-fee funds and you’ll be able to sift through these funds with Merrill’s screener or use the Select Funds choices to craft your portfolio from dozens of choices across company size and style.

Merrill’s page for each fund lays out its vital statistics, including its Morningstar rating, top holdings, and annualized performance.

And you can make your mutual fund investments feel like your 401(k) deductions by using Merrill’s automatic investing plan.

Pick your amount and schedule, and you’ll be buying funds without even having to worry about it, and you can change the plan at any time.

• The minimum amount to open a brokerage account: is $0
• Standard pricing: $0 for no-transaction-fee or load-waived funds; $19.95 for transaction-fee funds
• Mutual fund highlight: More than 2,400 no-transaction-fee funds

Should you invest actively or passively with mutual funds?

 When you buy mutual funds, you hire a fund manager to manage your money. So you have to let him do the job.

Research shows that passive systems perform better than active ones. If you are not an expert, there is no point in going beyond the professionals.

Mutual funds can be managed either actively or passively, although they are usually linked to previous mutual funds.

Active managers try to beat the market by finding stocks that are undervalued and buying and selling them at the right time. Because these mutual funds are actively managed, they tend to charge a higher fee ratio.

In contrast, passively managed funds, such as index funds, simply copy an index, often the Standard & Poor’s 500 indexes.

They are just trying to keep up with the index’s performance. Because of this approach, passively managed funds tend to charge less than active funds.

Additionally, many mutual funds charge an early settlement fee if you are in and out of a short period, often 30 days or less. This is an added incentive for passive investment.

Who Should Invest in Mutual Funds?

Mutual funds are a great choice for all types of investors, from beginners to advanced. They provide a way to easily diversify your investment, and you can do this for a very low fee.

These are two reasons why they are so widely used in popular retirement vehicles such as 401 (k) accounts or IRAs.

A well-diversified fund can be ideal for investors who are just starting and who know little about investing.

Investment legend Warren Buffett has long advised investors to buy index funds based on the S&P 500 index, which can easily be done with the help of mutual funds.

How much money do you need to invest in a mutual fund?

Mutual funds may require a minimum initial amount when you first buy funds, often $ 2,500 to $ 3,000.

Then you may only need a small amount to continue investing in mutual funds. This makes it easier to continue buying funds in regular installments.

However, buying in a 401 (k) usually overrides this minimum and allows you to deposit any amount of any salary into the fund.

Finally, it’s worth noting that some mutual funds charge a fee or commission when buying these funds.

They can easily be avoided by looking for no-load mutual funds. Sales commission is money that should go into your pocket, not a public company.