Advertiser Disclosure

Best Brokers for Mutual Funds 2019

Jan. 23, 2019
Brokers, Investing, Investments
At NerdWallet, we adhere to strict standards of editorial integrity to help you make decisions with confidence. Many or all of the products featured here are from our partners. Here’s how we make money.

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 to keep track of. (Learn more about the logistics of fund investing in the explainer at the bottom of the page.)

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 providers 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 top dogs across a variety of categories that matter most to fund investors.

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.

3.0 NerdWallet rating
  • 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: Assessed by product type; fund minimums start at $1,000.
Chales Schwab
5.0 NerdWallet rating
  • Offers more than 4,300 no-transaction-fee funds. See our Charles Schwab review.
  • Mutual fund commission: $0 on Schwab and OneSource funds, otherwise up to $49.95.
  • Account minimum: $0.
  • Promotion: $100 cash bonus with qualifying deposit.

In the realm of mutual fund investing — particularly for fund purists — Vanguard is an obvious choice. The provider has always been a standout in employer-sponsored retirement plans, particularly for its lineup of low-expense-ratio index funds. Although its online presence may not be as robust as other providers, Vanguard offers just enough of what you need (screeners, research, ratings) to get the job done without being overwhelming. (Note: The overall 3-star rating is based on our evaluation of Vanguard’s offering for stock investors.)

In the past, the price of entry (the minimum investment requirement) for some Vanguard funds was prohibitive for those investing outside of a company plan. But the company recently lowered the investment minimum on Admiral Shares — which charge lower fees than regular investor share classes — for 38 of its index mutual funds. The minimum is now $3,000; it was previously $10,000.

Similarly, Charles Schwab, a strong all-around fund provider, recently eliminated investment minimums on all Schwab index mutual funds, which, like Vanguard, have the added bonus of having some of the lowest expense ratios in the industry. This means savers with small amounts of money can get their money invested right away and, over time, continue to add small, regular contributions.

 

Biggest selection of no-transaction-fee funds

To avoid mutual fund trading commissions, check out the large selection of no-transaction-fee funds at Charles Schwab and E-Trade.

Etrade
4.5 NerdWallet rating
  • Offers more than 4,400 no-transaction-fee funds. See our E-Trade review.
  • Mutual fund commission: $19.99.
  • Account minimum: $500 ($0 for IRAs).
  • Promotion: Up to 500 commission-free trades with deposit of $10,000 or more.
Chales Schwab
5.0 NerdWallet rating
  • Offers more than 4,300 no-transaction-fee funds. See our Charles Schwab review.
  • Mutual fund commission: $0 on Schwab and OneSource funds, otherwise up to $49.95.
  • Account minimum: $0.
  • Promotion: $100 cash bonus with qualifying deposit.

This category has become one of the most competitive, with a handful of brokers offering thousands (quite literally) of no-transaction-fee (NTF) funds in their lineup. Since mutual fund commissions tend to be much higher than stock trading commissions, this can add up to thousands of dollars of savings over time.

Based on numbers alone, E-Trade and Charles Schwab lead the pack, with each offering roughly 4,400 NTF funds apiece. Both brokers waive commissions on any funds carried that charge sales loads (an additional charge we recommend investors avoid). Just be aware: When you buy an NTF fund there are minimum holding requirements, typically around 90 days. Selling before the timer runs out means you’ll pay an early redemption fee of around $50.

Honorable mentions are certainly worthwhile here: TD Ameritrade and even stock-centric Interactive Brokers are no slouches in the NTF-fund category. Each has just over 4,000 on its roster.

Best brokers for low costs

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.

5.0 NerdWallet rating
  • Competitive commissions on funds and stock trades. See our Ally Invest review.
  • Mutual fund commission: $9.95 for no-load mutual funds.
  • Account minimum: $0.
  • Promotion: Up to $3,500 cash bonus + commission-free trades for new accounts with qualifying balance.
3.0 NerdWallet rating
  • 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: Assessed by product type; fund minimums start at $1,000.

Investing costs come in several flavors, including trading costs (commissions, account fees) and expenses on the investments themselves. (Get the lowdown on investment fees, from brokerage costs to sales loads.)

On the investment-expense 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% and $1,000 investment minimums. (For more background, see our explainer on target-date funds.)

We also include Ally Invest in this 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. The drawback of going with Ally? It has no NTF mutual funds. However, for investors who dabble in both stocks and mutual funds, Ally’s services may offer the perfect fit.

Fidelity is a notable runner-up in this category as well. In late 2018 the firm upped the ante on low-fee funds by rolling out two zero-fee index mutual funds (the Fidelity ZERO Total Market Index Fund and the Fidelity ZERO International Index Fund), neither of which have an investment minimum.

Best fund research and tools

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

5.0 NerdWallet rating
  • Easy-to-follow portfolio planning tools and strong research lineup. See our TD Ameritrade review.
  • Mutual fund commission: $49.99 for no-load funds; $0 on load funds.
  • Account minimum: $0.
  • Promotion: $100-$600 cash bonus with a qualifying deposit.
3.0 NerdWallet rating
  • Top-notch research, screening and retirement planning tools. See our T. Rowe Price review.
  • Mutual fund commission: No fee for T. Rowe Price funds or other NTF funds; $35 for funds not on the no-transaction-fee list.
  • Account minimum: $2,500 ($1,000 for IRAs).

Picking funds and building a balanced portfolio is made easier by the Portfolio Planner tools at TD Ameritrade, part of its impressive brokerage platform. It helps users create a target asset allocation plan with funds alone, or a mix of stocks, funds, exchange-traded funds (ETFs) and bonds. Investors can build a customized allocation model from scratch or pick a pre-built one and use it to find investments that best fit the strategy. Even more guidance is available via the broker’s regularly updated list of the best funds in various categories, as evaluated by third-party researcher Morningstar.

Like Vanguard, fund stalwart T. Rowe Price is known for its high-quality mutual 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. But it’s T. Rowe’s asset allocation planning tool in particular that we’re big fans of. It provides portfolio mix guidelines for a number of investing goals (retirement, college savings, an upcoming planned expense).

An honorable mention goes to Merrill Edge for its “Fund Story” feature. It provides details on any mutual fund’s holdings, the sectors it covers, its historical performance, third-party analyst ratings and more — all in an easy-to-follow format. Also included: a dynamic fee analyzer that illustrates the cost of owning the fund over time.

Best brokers for the hands-off fund investor

Vanguard Personal Advisor Services and Betterment have services that will build and manage your mutual fund portfolio and provide access to human advice.

5.0 NerdWallet rating
  • Low account minimum for basic portfolio management. See our Betterment review.
  • Account management fee: 0.25% to 0.40%.
  • Investment expense ratio: 0.13% average.
  • Account minimum: $0.
  • Promotion: Up to 1 year free management with qualifying deposit.
4.5 NerdWallet rating

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, Vanguard Personal Advisor Services and Betterment serve investors at both ends of the wealth spectrum. (Vanguard’s overall 4-star rating here is based on our scoring of its robo-advisory service as opposed to its brokerage product.)

Although Vanguard’s $50,000 minimum investment requirement may be a big first hurdle, it buys customers access to a high level of service, including the ability to consult with Vanguard’s band of certified financial planners. The robo builds portfolios on a client-by-client basis by drawing mainly from its own low-fee index funds and, if needed, ETFs and actively managed funds. Clients also can include a money market fund for access to liquidity. The company’s 0.30% of assets management fee is less than what other robos charge for a similar level of human access and customization.

For a lower cover charge ($0 minimum for its entry-level digital offering and a 0.25% management fee), Betterment assembles ETF portfolios allocated based on an investor’s time frame and tolerance for volatility. If you meet the higher $100,000 minimum for Betterment Premium (0.40% management fee), you’re allowed to adjust the percentage of your portfolio in each investment and get phone access to financial advisors. Digital customers can consult advisors only via in-app messaging.

Best brokers for socially conscious investors

These providers offer a wide range of offerings and tools for investors interested in investing in funds (mostly ETFs) that align with their values.

 

4.5 NerdWallet rating
  • Robust values-based investing options. See our Wealthsimple review.
  • Account management fee: 0.40% to 0.50%.
  • Account minimum: $0.
  • Promotion: First $10,000 managed for free for one year.
4.5 NerdWallet rating

Our recommendations for fund providers that offer socially responsible investment (SRI) options skew toward providers that provide a second level of vetting by curating picks for clients. The portfolio managers at these companies do the extra work of assuring that fund holdings truly adhere to the standards they say they do. They also consider management fees, which tend to be higher than those charged by non-SRI funds.

TD Ameritrade Essential Portfolios (the robo-advisor arm of TD’s five-star brokerage business) is a top pick in our roundup of best brokers for socially conscious ETF investors, and it gets the nod here, too. (After all, like regular mutual funds, ETFs contain a collection of companies. The only difference is that they trade like stocks.) The company offers Socially Aware portfolios as an alternative to its core portfolios by drawing from eight ETFs that score high on environmental, social and governance factors while also having reasonable expense ratios. That’s among the most SRI offerings for robo-advisors.

Values-based investing has been integral to Wealthsimple’s offerings from the start. In addition to its SRI portfolios, which draw from six ETFs, it also offers a Shariah-compliant investment option that complies with Islamic law. The halal investing portfolio is a collection of 50 individual stocks (no ETFs) screened by a third-party committee of Shariah scholars.

Best brokers for mutual funds 2019

Broker
Best
for
Highlights
Commiss-
ions
Promotion
Account minimum
Start investing
Vanguard
Vanguard
Overall + Low costs
Industry low-cost fund leader
$0 for Vanguard funds;
$8-$20 for others
None
$0
Charles Schwab
Charles Schwab
Overall + No-fee funds
4,300 NTF funds; no investment minimum on Schwab index funds
$0 on Schwab and OneSource funds, otherwise $49.95
$100 referral for first-time clients
$0
E*Trade
E*Trade
No-fee funds
More than 4,400 NTF funds
$19.95
Up to 500 commission-free trades with $10,000-plus deposit size
$0 for IRAs; $500 for non-IRAs
Ally Invest
Ally
Low costs
Competitive fund commissions
$9.95 for no-load funds; $0 for load funds
$50-$3,500 in cash bonus + free trades with a qualifying deposit
$0
TD Ameritrade
Fund research and tools
Portfolio planning tools; vetted fund recommendations
$49.99 for no-load funds; $0 load funds
$100 to $600 cash bonus with qualifying deposit
$0
T.
Rowe Price
T. Rowe Price
Fund research and tools
Detailed
retirement planning tools; fund research
$0 on T. Rowe Price funds and other NTF funds; $35 otherwise
None
$1,000 for IRAs; $2,500 for non-IRAs
Betterment
Betterment
Hands-off investing
Inexpensive access to financial advisors; goal-based tools
0.25%-0.40% management fee
Up to 1 year of free management with qualifying deposit.
$0
Vanguard Personal Advisor Services
Hands-off investing
Individualized portfolios created by advisors
0.30% management fee
None
$50,000
Wealthsimple
Wealthsimple
Socially conscious investing
Strong SRI portfolio option
0.40%-0.50% management fee
First $10,000 managed for free for one year
$0
TD Ameritrade Essential Portfolios
Socially conscious investing
Low-fee SRI portfolio options
0.30% management fee
None
$5,000

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 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:

  • 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 (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.

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.

About the author