10 Best Brokers for Mutual Funds of January 2022
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Mutual funds are the investing world’s two-for-one: a single investment product with built-in diversification. They are a great tool for long-term investors who want a diversified portfolio composed of a collection of investments, versus a long list of individual stocks or bonds to keep track of.
Right now is a particularly good time to be a mutual fund investor. Many of the once-pricier players have slashed or completely done away with fund investment minimums. Fidelity has gone so far as to cut management fees to the bone, rolling out a few zero-fee index funds. And the number of no-transaction-fee mutual funds — funds you can invest in without paying any commission whatsoever — continues to grow at many providers.
It’s becoming a tight race to the top for discount brokers that serve fund investors. All of the brokers here offer a range of low-cost funds and resources to effectively manage your portfolio. To help narrow the field, here’s NerdWallet’s roundup of the best brokers for mutual fund investors.
Mutual funds are the investing world’s two-for-one: a single investment product with built-in diversification. They are a great tool for long-term investors who want a diversified portfolio composed of a collection of investments, versus a long list of individual stocks or bonds to keep track of.
Right now is a particularly good time to be a mutual fund investor. Many of the once-pricier players have slashed or completely done away with fund investment minimums. Fidelity has gone so far as to cut management fees to the bone, rolling out a few zero-fee index funds. And the number of no-transaction-fee mutual funds — funds you can invest in without paying any commission whatsoever — continues to grow at many providers.
It’s becoming a tight race to the top for discount brokers that serve fund investors. All of the brokers here offer a range of low-cost funds and resources to effectively manage your portfolio. To help narrow the field, here’s NerdWallet’s roundup of the best brokers for mutual fund investors.
Best Brokers for Mutual Funds
| Broker | NerdWallet Rating | Fees | Account Minimum | Promotion | Learn More |
|---|---|---|---|---|---|
 E*TRADE Learn more on E*TRADE's website | $0 per trade | $0 | None no promotion available at this time | Learn more on E*TRADE's website | |
 TD Ameritrade Learn more on TD Ameritrade's website | $0 per trade | $0 | None no promotion available at this time | Learn more on TD Ameritrade's website | |
 Interactive Brokers IBKR Lite Learn more on Interactive Brokers's website | $0 per trade | $0 | None no promotion available at this time | Learn more on Interactive Brokers's website | |
 J.P. Morgan Self-Directed Investing Learn more on J.P. Morgan's website | $0 per trade | $0 | Get up to $625 when you open and fund a J.P. Morgan Self-Directed Investing account with qualifying new money | Learn more on J.P. Morgan's website | |
 Merrill Edge Learn more on Merrill Edge's website | $0 per trade | $0 | Up to $600 when you invest in a new Merrill Edge® Self-Directed account. | Learn more on Merrill Edge's website |
on E*TRADE's website
E*TRADE
Fees
$0per trade
Account Minimum
$0Promotion
Noneno promotion available at this time
on E*TRADE's website
on TD Ameritrade's website
TD Ameritrade
Fees
$0per trade
Account Minimum
$0Promotion
Noneno promotion available at this time
on TD Ameritrade's website
on Interactive Brokers's website
Interactive Brokers IBKR Lite
Fees
$0per trade
Account Minimum
$0Promotion
Noneno promotion available at this time
on Interactive Brokers's website
on J.P. Morgan's website
J.P. Morgan Self-Directed Investing
Fees
$0per trade
Account Minimum
$0Promotion
Get up to $625when you open and fund a J.P. Morgan Self-Directed Investing account with qualifying new money
on J.P. Morgan's website
on Merrill Edge's website
Merrill Edge
Fees
$0per trade
Account Minimum
$0Promotion
Up to $600when you invest in a new Merrill Edge® Self-Directed account.
on Merrill Edge's website
on Fidelity's website
Fidelity
Fees
$0per trade for online U.S. stocks and ETFs
Account Minimum
$0Promotion
Noneno promotion available at this time
on Fidelity's website
Want to compare more options? Here are our other top picks:
Disclosure: The author held no positions in the aforementioned securities at the time of publication.
Last updated on January 10, 2022
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Methodology
NerdWallet’s comprehensive review process evaluates and ranks the largest U.S. brokers by assets under management, along with emerging industry players. Our aim is to provide an independent assessment of providers to help arm you with information to make sound, informed judgements on which ones will best meet your needs. We adhere to strict guidelines for editorial integrity.
We collect data directly from providers through detailed questionnaires, and conduct first-hand testing and observation through provider demonstrations. The questionnaire answers, combined with demonstrations, interviews of personnel at the providers and our specialists’ hands-on research, fuel our proprietary assessment process that scores each provider’s performance across more than 20 factors. The final output produces star ratings from poor (one star) to excellent (five stars). Ratings are rounded to the nearest half-star.
For more details about the categories considered when rating brokers and our process, read our full methodology.
To recap our selections...
NerdWallet's Best Brokers for Mutual Funds of January 2022
Frequently asked questions
Mutual funds pull together two things — money from multiple investors, and stocks, bonds or other assets. Investors buy shares in the fund, and their money is then pooled to purchase investments that align with the fund’s goal.
For investors, mutual funds are a convenient way to instantly diversify even small amounts of money. You might not be able to afford to purchase a share of each individual investment in a mutual fund — these funds often hold 100 investments or more. Even if you could afford it, buying would take time and incur multiple transaction fees.
That depends on the type of mutual fund you choose. Actively managed mutual funds employ a professional to invest and manage the fund’s assets. That costs more than a passively managed fund, such an index fund, which skips the fund manager and instead selects its investments by copying a benchmark, such as the S&P 500. An S&P 500 index fund aims to mirror the performance of the benchmark index.
In either case, keeping wealth-eroding fees at bay requires guarding against both high brokerage account fees and the costs that come with mutual funds themselves. There are three common expenses associated with mutual funds:
1. Transaction fees: Charged on the purchase or sale of the fund — and in some cases, on both. Select a broker with a long list of no-transaction-fee mutual funds — like many of the ones we’ve recommended above — to avoid this cost.
2. Early redemption fees: Charged by a broker for selling out of a fund in the first 60 to 90 days. Aim to hold your mutual funds as a long-term investment.
3. Expense ratios: This charge comes from the fund itself. It’s an annual fee that is often higher on actively managed funds than passively managed funds. Expense ratios are expressed as a percentage of your investment: A fund with a 1% expense ratio will cost $10 a year for every $1,000 you invest. You can’t avoid expense ratios, but you can steer your money toward low-cost funds. Familiarizing yourself with the average mutual fund expense ratios will help you recognize if you’re paying too much.
You can buy mutual funds at any online broker or directly through a fund company, such as BlackRock or American Funds. We have some specific instructions about investing in mutual funds to help guide you. In general, online brokers will offer a larger and more diverse fund selection than direct purchase through a fund company.
If you don’t have an individual retirement account or brokerage account, you’ll need to open one. You can do that through any of the brokers mentioned above (here's a step-by-step for how to open a brokerage account). If you have an employer-sponsored retirement plan, such as a 401(k), it likely offers access to a small selection of mutual funds as well.
You’ll generally face two minimums: A brokerage account minimum, which typically falls between $0 and $2,500, and the mutual fund minimum, which may be $1,000 or more. These minimums are combined — if the broker allows you to fund an account with $1,000, you can then invest that money in a mutual fund with a minimum of $1,000. As referenced above, many brokers now offer mutual funds with no or low minimums.
If your broker doesn't, you might consider exchange-traded funds, which are a type of passive mutual fund you can buy for a share price, much like an individual stock. That often means a lower barrier to entry. (Compare mutual funds vs. ETFs.)
As with any investment, the hope here is that the money you put in will earn a return. Mutual funds earn that return through dividends or interest on the securities in their portfolios or by selling a security that has gone up in value. In both cases, the fund typically passes those returns through to investors.
You also earn a return if the value of the mutual fund itself increases and you sell that fund for more than its purchase price.
