Best Brokers for Mutual Funds

Brokers, Investing, Investments

NerdWallet offers financial tools and advice to help people understand their options and make the best possible decisions. The guidance we offer and info we provide are deeply researched, objective and independent.

We spent over 300 hours reviewing the top online brokers before selecting the best for our readers. And to help you find the one that’s best for you, we’ve highlighted their pros, cons and current offers.

Mutual funds are the investing world’s two-for-one: a single product with built-in diversification designed to achieve a specific investment objective. These funds are a great fit for long-term investors who want to build a diversified portfolio out of just a handful of investments, instead of picking and choosing individual stocks. (Check out our explainer to learn more about mutual funds).

If that’s you, the best broker is the one that has the range of fund offerings and resources you want at the most favorable terms. To help you narrow the field, here’s NerdWallet’s roundup of the top dogs in a variety of categories.

Summary: Best online brokers for mutual funds

 


 

Best mutual fund providers overall

These brokers stand out for hitting the mark on the things that matter to mutual fund investors: selection, affordability, service and tools.

merrill edge logo 4.5-stars
  • Has more than 2,000 no-transaction-fee funds. See our Merrill Edge review.
  • Mutual fund commission: $19.95 for no-load transaction fee funds.
  • Account minimum: $0; fund minimums set by fund companies.
  • Promotion: Cash bonuses ranging from $100 for accounts of $20,000-$49,999, to $600 for $200,000 or more.
Chales Schwab 5.0-stars
  • Offers more than 3,000 no-transaction-fee funds. See our Charles Schwab review.
  • Mutual fund commission: $0 for no-transaction-fee funds; $76 per trade for all others.
  • Account minimum: $1,000; waived with monthly auto-deposits of $100 or more; fund minimums set by fund companies.
  • Promotion: $100 referral award for first-time clients

When it comes to affordability and array of fund choices, Merrill Edge is hard to beat. It offers an impressive list of 2,000-plus no-transaction-fee funds. It charges a $19.95 commission for funds that aren’t on the list, very low compared with most brokers. Its account minimum is $0, although individual funds set their own minimums.

Merrill Edge also offers an impressive array of mutual fund research. Morningstar and Lipper provide mutual fund reviews and rankings, and Merrill’s own investment professionals evaluate and rank the top Merrill Lynch Select Funds in each category. Merrill Edge offers no commission-free exchange traded funds — a big shortcoming if that’s part of your investing strategy outside of mutual funds and individual stocks.

Charles Schwab brought online discount investing to the masses, and it appears on many of our “best brokers for …” lists, including best brokers for IRAs, exchange traded funds (ETFs) and beginners. In the realm of mutual fund investing, the company is strong on all fronts. Schwab offers more than 3,000 no-transaction-fee mutual funds, within which investors pay no commission for purchases, and it helps investors whittle down the massive list of funds to find the best match.

The standout feature for mutual fund investors is Schwab’s Mutual Fund OneSource platform. With as little as $100, customers can start investing in some of Schwab’s fund offerings, and they can make subsequent investments of as little as $1.

Where the company falls short is with its steep $76 commission for funds that aren’t on its no-fee list — a good deterrent for anyone considering straying outside the lines.

Biggest selection of no-transaction-fee funds

Merrill Edge and Fidelity offer the largest selection of no-transaction-fee mutual funds, ideal for investors who want to shop around.

merrill edge logo 4.5-stars
  • Has more than 2,000 no-transaction-fee funds. See our Merrill Edge review.
  • Mutual fund commission: $19.95 for no-load transaction fee funds.
  • Account minimum: $0; fund minimums set by fund companies.
  • Promotion: Cash bonuses ranging from $100 for new accounts of $20,000-$49,999, to $600 for $200,000 or more.
Fidelity Investments 5.0-stars
  • Offers more than 3,600 no-transaction-fee funds. See our Fidelity Investments review.
  • Mutual fund commission: $49.95 to $75 for funds not on the no-transaction-fee list.
  • Account minimum: $2,500 ($0 for rollover IRA or automated $200/month for Roth and traditional IRA); fund minimums set by fund companies.
  • Promotion: Get up to a 10% IRA match on future contributions with qualifying rollover.

Fund investors seeking variety should take a stroll down the well-stocked aisles at Merrill Edge and Fidelity Investments, which each earned a five-star rating from NerdWallet in the no-transaction-fee funds category.

Merrill Edge offers more than 2,000 no-transaction-fee mutual funds, while Fidelity has roughly 3,600. Schwab and TD Ameritrade are no slouches in this category, either, with healthy lineups of no-transaction-fee funds — about 3,000 and 2,000, respectively.

Side note for ETF investors: The equivalent of no-transaction-fee funds are commission-free ETFs, where the 200-plus selection at Charles Schwab and OptionsXpress are worth checking out. See our review of best brokers for ETF investors for more details and our reviews of other discount brokers.

Best brokers for cost-conscious investors

These brokers serve two types of bargain shoppers: investors who seek to slash brokerage and trading costs and those who seek to avoid excessive fund management fees.

Ally_R_Invest_Horz_Plum_smaller 4.5-stars
  • Competitive commissions (on funds and stock trades) and no account minimum to get started. See our Ally Invest review.
  • Mutual fund commission: $9.95 for no-load funds; $0 for funds that charge a load.
  • Account minimum: $0; fund minimums set by fund companies.
  • Promotion: None
vanguardlogo 4.0-stars
  • The leader in low-cost mutual funds charges rock-bottom expense ratios. See our Vanguard review.
  • Mutual fund commission: $0 for Vanguard funds, $8 to $35 for non-Vanguard and select funds.
  • Account minimum: $1,000 for IRAs and $3,000 for non-retirement accounts; fund minimums set by fund companies.

Ally Invest (formerly TradeKing) stands out for its rock-bottom mutual fund commissions: just $9.95 to buy no-load mutual funds and $0 for any funds that charge a load, compared with the $49-plus commission that many brokers charge. (That said, retirement investors shouldn’t change mutual funds like they’re socks.) If the funds you want to buy are not on any broker’s no-transaction-fee list, Ally’s low commissions are a good option. Plus, the broker has no minimum account requirement and charges no account fees.

On the expense ratio side of the equation, Vanguard is the industry’s gold standard for low-cost mutual funds and a longtime champion of index investing. Even the company’s more managed target-date mutual funds come with expense ratios as low as 0.05%. If you have a brokerage account at Vanguard, you’ll pay a $0 commission on Vanguard funds, $8 for Flagship funds, $20 for Voyager/Voyager Select funds and $35 for non-Vanguard funds. Other brokerages sell Vanguard’s mutual funds, too, so consider the availability of the company’s funds as you shop around.

Also worth a look in the low-cost category is Charles Schwab’s Mutual Fund OneSource platform. This is where you’ll find the broker’s no-transaction-fee funds for which as little as $100 gets you started in a retirement, brokerage or custodial account and where you can make subsequent investments of as little as $1.

Best fund research and tools

Investors will appreciate free access to investing tools and fund recommendations at these brokers.

td-ameritrade 5.0-stars
  • Independent research and recommendations in more than 45 fund categories. See our TD Ameritrade review.
  • Mutual fund commission: $49.95 for funds not on the no-transaction-fee list.
  • Account minimum: $0; fund minimums set by fund companies.
  • Promotion: Cash bonuses ranging from $100 for new accounts from $25,000-$99,999, to $600 for accounts of $250,000 or more, with qualifying rollover.
Fidelity Investments 5.0-stars
  • Free access to tools and data from Morningstar and Lipper. See our Fidelity Investments review.
  • Mutual fund commission: $49.95 to $75 for funds not on the no-transaction-fee list.
  • Account minimum: $2,500 ($0 for rollover IRA or auto-deposit of $200 a month for Roth and traditional IRA); fund minimums set by fund companies.
  • Promotion: Get up to a 10% IRA match on future contributions with qualifying rollover.

Getting extensive data at no additional cost is like finding a free all-you-can-eat buffet at what’s normally a pricey a la carte restaurant. That’s what investors get at TD Ameritrade. Its quarterly mutual fund Premier list is compiled by Morningstar and provides independent recommendations for no-transaction-fee mutual funds in more than 45 categories, which helps investors whittle down the prospects among the company’s 2,000 no-transaction-fee offerings.

At Fidelity, customers have access to a full suite of research tools from more than 20 providers, including Morningstar and Lipper ratings. And it’s free. The broker also offers online and in-person customer service and educational support, including free investor seminars at branch locations across the country.

T. Rowe Price also offers an impressive lineup of planning tools and fund screeners for free to noncustomers who register with the site. The company’s asset allocation planning tool provides portfolio mix guidelines for retirement based on your birth year; for college savings based on your child’s age or for an upcoming, planned expense based on the number of years until the cash is needed. FuturePath, a sophisticated retirement planning simulator, shows how current and future financial events — including buying and selling a home, covering a medical event and earning extra income in retirement — would affect your plan. Also worth a mention: T. Rowe’s lineup of 2,000-plus no-transaction-fee mutual funds.

Best brokers for the hands-off fund investor

E-Trade Adaptive Portfolio and Vanguard have services that will build your mutual fund portfolio with your input.

Etrade 4.0-stars
  • Offers investors the ability to add actively managed funds to an automated ETF portfolio. See our E-Trade Adaptive Portfolio review.
  • Account management fee: 0.30%.
  • Investment expense ratio: Hybrid portfolio ranges from 0.20% to 0.45%.
  • Account minimum: $10,000 for E-Trade Adaptive Portfolio.
  • Promotion: No management fee for 2016, plus $100 to $1,500 bonus depending on account size.
vanguardlogo 4.0-stars
  • Portfolios created by advisors on an individual basis. See our Vanguard Personal Advisors Services review.
  • Account management fee: 0.30%.
  • Investment expense ratios: 0.05% to 0.19%.
  • Account minimum: $50,000 for Vanguard Personal Advisor Services.

If managing your own portfolio seems daunting or hiring a financial pro is too pricey but you still want some control over your investment choices, now there’s a middle ground: a hybrid of the DIY and robo-advisor model.

What makes E-Trade Adaptive Portfolio different from other robo-advisors is that instead of limiting your portfolio to index-based ETFs, you can customize your portfolio by including actively managed mutual funds. E-Trade’s $10,000 minimum is higher than at most robo-advisors, but it gains you access to a higher level of service — a dedicated team of registered financial consultants to answer questions and offer guidance.

The next step up is services that pair automated portfolio management with a dedicated human financial advisor. The price of entry is steeper, but the personal touch can be extremely valuable, particularly if you’re rolling money into an IRA from a former workplace retirement plan. If you can meet Vanguard Personal Advisors Services’ $50,000 minimum, you’ll get a portfolio that is subsidized, at least in part, by the low-fee Vanguard funds. The company’s 0.30% management fee is in line with the robo-advisor competition. Another option, albiet with a $100,000 account minimum, is Personal Capital, although fees are tiered based on account balance, and those with less than $1 million pay 0.89%.

 

Best brokers for mutual funds

Broker
Best
for
Highlights
Commiss-
ions
Promotion
Account minimum
Start investing
Merrill Edge
Merrill Edge
Overall
+
No-fee funds
2,000+ no-transaction-fee funds; low commissions
$19.95
for no-load transaction fee funds
$100 to $600 cash bonus, depending on account size
$0
Charles Schwab
Charles Schwab
Overall
Many no-transaction-fee funds; can invest in small increments
$76
for transaction-fee funds
$100 referral award for first-time clients
$1,000
Fidelity
Fidelity Investments
No-fee funds
+
Fund research
3,600 no-transaction-fee funds
$49.95-$75
for transaction-fee funds
Up to 10% match on future contributions with rollover
$0 for IRAs (roll-over, auto deposit); $2,500 for non-IRAs
Vanguard
Vanguard
Low costs
Industry low-cost fund leader
$0 for Vanguard funds;
$8-$35 for others
N/A
$1,000 for IRAs, $3,000 for non-IRAs
Ally Invest
Ally
Low costs
Competitive commissions, no account minimum
$9.95 for no-load funds; $0 for load funds
None
$0
TD Ameritrade
Fund research
Extensive research; 2,000 no-transaction-fee funds
$49.95
for transaction-fee funds
$100 to $600 cash bonus, depending on account size
$0
E*Trade Adaptive Portfolio
E*Trade Adaptive Portfolios
Hands-off investing
Hybrid fund/ETF automated portfolios; allows customization
0.30% management fee; 0.20%- 0.45% hybrid portfolio expense ratios
No management fee for 2016; $100-$1,500 bonus based on account size
$10,000 (Adaptive Portfolio)
Vanguard Personal Advisor Services
Vanguard
Hands-off investing
Individualized portfolios created by advisors
0.30% management fee; 0.05%-0.19% expense ratios
N/A
$50,000 (Personal Advisor Services)

Learn more about mutual funds

What is a mutual fund?

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.

Read our full mutual fund explainer for more details.

How much does a mutual fund cost?

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, like the Standard & Poors 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:

  • 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.
  • 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.
  • 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.

How do you invest in mutual funds?

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. 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.

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

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.

If that’s too big of an investment, 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

How do you make money from a mutual fund?

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.

Dayana Yochim is a staff writer at NerdWallet, a personal finance website: Email: dyochim@nerdwallet.com. Twitter: @DayanaYochim.

Updated Sept. 22, 2017