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Best Brokers for Mutual Funds 2018

January 19, 2018
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. They are a great tool for long-term investors who want a diversified portfolio composed of just a handful of investments, versus a long list of individual stocks. (Check out our explainer to learn more about mutual funds).

If you like mutual funds, your ideal broker will offer a wide range of low-cost funds and all the resources you need to effectively manage your portfolio. To help narrow the field, here’s NerdWallet’s round-up of the top dogs across 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.

Etrade
  • Offers more than 4,400 no-transaction-fee funds. See our E-Trade review.
  • Mutual fund commission: $19.95
  • Account minimum: $0
  • Promotion: 60 days of commission-free trades with deposit of $10,000 or more
Chales Schwab
  • Offers more than 4,300 no-transaction-fee funds. See our Charles Schwab review.
  • Mutual fund commission: $76
  • Account minimum: $1,000; waived with monthly auto-deposits of $100 or more
  • Promotion: $100 cash bonus with qualifying deposit

When it comes to affordability, array of fund choices, ample research and access to portfolio-building tools, E-Trade and Charles Schwab are solid choices for mutual fund investors.

E-Trade offers an impressive list of 4,400-plus no-transaction-fee (NTF) funds which, as the label implies, means customers pay no commission to purchase the funds. That’s the most of any of the brokerage houses we review. To help investors home in on the funds that fit the bill, E-Trade put out a quarterly All-Star list that highlights the top choices, according to the firm’s analysts. If a customer wants to stray from the NTF fund list, they’ll pay a reasonable $19.95 commission, which is competitive with most brokers.

The financial bar for getting started investing at E-Trade is pretty low: Its IRA minimum is $0 (and it’s still a low $500 for a regular brokerage account). Just note that individual funds set their own minimums, so having enough to open an account isn’t the same as having enough money to buy into a mutual fund.

Charles Schwab appears on many of our best brokers lists, including best brokers for beginners and best brokers for IRAs. In the realm of mutual fund investing, the company offers more than 4,300 NTF mutual funds, and the broker goes so far as to waive its steep $76 mutual fund commission on any funds it carries that charge sales loads (an additional charge we recommend investors avoid).

Schwab has removed the investment minimum on its own index mutual funds, which have the added bonus of having some of the lowest expense ratios in the industry. While the $1,000 account minimum may be richer than you’ll find at some other brokers, it’s possible to get around the restriction by signing up for monthly transfers of $100 or more.

 

Biggest selection of no-transaction-fee funds

To avoid mutual fund trading commissions, check out the large selection of no-transaction-fee funds at Merrill Edge and TD Ameritrade.

td-ameritrade
  • Offers 4,100+ no-transaction-fee funds. See our TD Ameritrade review.
  • Mutual fund commission: $49.99
  • Account minimum: $0
  • Promotion: $100-$600 cash bonus with a qualifying deposit
merrill edge logo
  • Has roughly 3,300 no-transaction-fee funds. See our Merrill Edge review.
  • Mutual fund commission: $19.95
  • Account minimum: $0
  • Promotion: $100-$600 cash bonus with a qualifying deposit

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

TD Ameritrade has roughly 4,100, while Merrill Edge offers roughly 3,300 no-transaction-fee mutual funds. That’s a lot of funds to sift through, but each broker compiles regularly updated lists of the best funds in various categories as evaluated either by Morningstar (for TD Ameritrade clients) or, in the case of Merrill Edge, its in-house investment pros.

Fidelity and Vanguard are no slouches in this category, either, with healthy lineups of no-transaction-fee funds — about 3,700 and 2,800, respectively. Along with E-Trade and Charles Schwab, they deserve an honorable mention in this category.

Buyers of NTF funds should be mindful of short-term redemption fees. In exchange for waiving the trading commission, brokers expect investors to commit to holding the investment for a little while, typically 30 to 90 days. Unload the fund any earlier and you’ll pay a penalty (around $50 is pretty standard).

 

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
  • Competitive commissions (on funds and stock trades) and no account minimum to get started. See our Ally Invest review.
  • Mutual fund commission: $9.95
  • Account minimum: $0
  • Promotion: $100 cash bonus with qualifying deposit
vanguardlogo
  • 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 $20 for non-Vanguard and select funds
  • Account minimum: $0

Investing costs come in several flavors, including trading costs (commissions, account fees) and expenses on the investments themselves (a.k.a. expense ratios), which are ongoing charges that compound and erode investor returns over time.

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%. (For more background, see our explainer on target-date funds.)

If you have a brokerage account at Vanguard, you’ll pay no commission on Vanguard funds, and $8 to $20 to purchase non-Vanguard funds online. Once you’ve purchased a fund, which requires a minimum initial investment that typically starts at $1,000, Vanguard allows you to dollar-cost average (adding small amounts over time) for $3 per transaction as long as you commit to adding a $100 minimum at least two times.

Ally Invest earns a shout-out in the low-cost category for its rock-bottom mutual fund commissions. Compared with the $49-plus commission that many brokers charge, Ally’s $9.95 to buy no-load mutual funds and $0 for any funds that charge a load is a bargain. Likely it’s to make up for the fact that Ally doesn’t offer any no-transaction-fee mutual funds or commission-free ETFs.

For investors who want to consolidate all of their investments, funds and stocks alike, at one provider, Ally may fit the bill. Its low stock trading costs of $4.95 and $1 less for frequent traders earned it a call-out for low costs in our roundup of the best online brokers for stock trading. Just make sure the low mutual fund trading commission doesn’t tempt you to over-trade mutual funds.

 

Best fund research and tools

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

trowepricelogo
  • Top-notch research, screening and retirement planning tools. See our T. Rowe Price review.
  • Mutual fund commission: $35 for funds not on the no-transaction-fee list
  • Account minimum: $2,500
Fidelity Investments
  • Free access to tools and data from Morningstar and Lipper. See our Fidelity Investments review.
  • Mutual fund commission: $49.95 for non-Fidelity funds
  • Account minimum: $2,500
  • Promotion: Up to 500 commission-free trades with a qualifying deposit

Fidelity’s robust lineup of research for stock investors earned it a spot in our roundup of top brokers, so it’s no surprise that it earns a shout-out here, too. Among the firm’s deep lineup of research and data partners are two that all fund investors will appreciate: Morningstar and Lipper. Access to ratings and data from these providers is free to Fidelity customers. The broker’s online and in-person educational support is worth noting and includes free investor seminars at branch locations across the country.

No roundup of best brokers for mutual fund investors would be complete without stalwart T. Rowe Price on the list. Like Vanguard, the company is known for its high-quality funds with low expense ratios. On the research and planning front, the Mutual Fund Research tool lets users research funds by family, category (including target-date funds) and Morningstar rating.

In particular, we’re big fans of T. Rowe’s asset allocation planning tool, which provides portfolio mix guidelines for a number of investing goals (retirement, college savings, an upcoming planned expense). Getting even more granular, we recommend FuturePath, a sophisticated retirement planning simulator that 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. Bonus: Even noncustomers can access it by simply registering with the site.

 

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 and provide access to human advice.

Etrade
  • Investors can 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 0.05% to 0.11%
  • Account minimum: $5,000
  • Promotion: Free management for first six months ($10,000 minimum)
vanguardlogo

If managing your own mutual fund portfolio seems daunting or hiring a financial pro is too pricey, but you still want some control over your investment choices, E-Trade Adaptive Portfolios and Vanguard provide a middle ground service — a hybrid of the DIY and robo-advisor (automated portfolio management) model.

What makes E-Trade Adaptive Portfolio different from other robo-advisors is that it gives customers the choice between an all-ETF portfolio or one that uses ETFs and actively managed mutual funds. E-Trade’s $5,000 minimum may be higher than at most robo-advisors (Betterment’s is $0 and Wealthfront’s $500), but customers have access to a higher level of service — a dedicated team of registered financial consultants to answer questions and offer guidance.

For even more hands-on fund investing guidance, there’s Vanguard Personal Advisor Services. It pairs automated portfolio management (portfolios that draw, in part, from Vanguard’s stable of low-fee funds) with a dedicated human financial advisor. The $50,000 price of entry is a lot steeper, but the personal touch can be extremely valuable, particularly if you’re rolling money into an IRA from a former workplace retirement plan. Plus the company’s 0.30% management fee, the same as E-Trade Adaptive Portfolio’s, is in line with the robo-advisor competition.

 

Best brokers for mutual funds 2018

Broker
Best
for
Highlights
Commiss-
ions
Promotion
Account minimum
Start investing
Ally Invest
Ally
Low costs
Competitive commissions, no account minimum
$9.95 for no-load funds; $0 for load funds
$100 cash bonus
$0
Merrill Edge
Merrill Edge
No-fee funds
3,300 NTF funds; low commissions
$19.95
$100 to $600 cash bonus, depending on account size
$0
E*Trade
E*Trade
Overall
Low costs, 4,400 NTF funds, quality research
$19.95
60 days commission-free trades with $10,000-plus deposit size
$0 for IRAs; $500 for non-IRAs
TD Ameritrade
No-fee funds
4,100 NTF funds; Morningstar recommendations
$49.99
$100 to $600 cash bonus, depending on account size
$0
Charles Schwab
Charles Schwab
Overall
4,300 NTF funds; no investment minimum on Schwab index funds
$76 (waived on funds that carry a sales load)
$100 referral for first-time clients
$1,000;
waived with automatic monthly transfers
Vanguard
Vanguard
Low costs
Industry low-cost fund leader
$0 for Vanguard funds;
$8-$20 for others
N/A
$0
T.
Rowe Price
T. Rowe Price
Fund research and tools
Detailed
retirement planning tools
$35
N/A
$1,000 for IRAs; $2,500 for non-IRAs
Fidelity
Fidelity Investments
Fund research and tools
3,600 no-transaction-fee funds
$0 on Fidelity funds; $49.95 for others
300-500 free trades depending on account balance
$0 for IRAs; $2,500 for non-IRAs
E*Trade Adaptive Portfolio
E*Trade
Hands-off investing
Hybrid index and actively managed fund portfolios
0.3% management fee
N/A
$5,000
Vanguard Personal Advisor Services
Vanguard
Hands-off investing
Individualized portfolios created by advisors
0.30% management fee
N/A
$50,000

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.

Updated Jan. 19, 2018.

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