Best Online Brokerage Firm Accounts For Mutual Funds Investors

Best discount online brokerage firms for mutual funds investing and trading. Review top rated, low fees (transaction commissions) accounts (including IRA) to buy no-load, index, NTF, and target mutual funds in 2015.

Online Brokerage
Mutual Fund
4.5-star brokerage firm rating

Buy - $9.95, sell - $9.95.

TradeKing is the sixth largest brokerage house in the U.S. The firm does not charge hidden fees, IRA setup, maintenance and account inactivity fees (if account balance is above $2,500). Their mutual fund transaction fee is hard-to-beat $9.95 per trade.

TradeKing offers over 12,000 mutual funds, including load and no-load funds from most leading fund families, such as Vanguard and Fidelity. Their funds cover a full range of investment objectives, strategies and asset classes.

TradeKing's Mutual Fund Center tool makes it easy to find top mutual funds performers, to screen funds according to your criteria, and see in-depth breakdowns of mutual fund characteristics.

The firm offers free DRIPs (dividend reinvestment plans) and great customer service. Beginners can place broker-assisted mutual funds trades for the same low price of $9.95, and can learn to trade and pick up investing ideas in the website's friendly user community.

TradeKing is one of the best online brokers for mutual funds investors, beginners as well as for long-term, and buy-and-hold investors.

Read full TradeKing review.

Promotion link:  Get $200 and trade for just $4.95.

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Online Brokerage
Mutual Fund

2,600+ FREE, no-load, no-transaction fee mutual funds (NTF program).
No-load mutual funds - $17.
Load funds are free to buy and $17 to sell.

Scottrade is one of the largest, best-known, and most established brokerage houses in the United States. It offers simple, flat rate commission plan, which is the cheapest among the largest five brokerage firms. No-load mutual fund transactions are priced at just $17. Compare it to $49.99 charged at TD Ameritrade, $76 to buy (free to sell) at Charles Schwab and $49.95 ($75 for some funds) to buy (free to sell) at Fidelity Investments. Scottrade does not charge hidden fees, as well as IRA setup, maintenance and account inactivity fees. The broker provides highly rated customer service and rich selection of investment research amenities.

Scottrade offers huge selection of over 2,600(!) NTF - free to buy and sell - no load mutual funds. With these funds you could essentially invest in mutual funds commission-free. The firm offers the largest selection of mutual funds - over 14,500 - from all major funds families including American Funds, Fidelity and Vanguard. To help clients pick best funds, they offer predefined screeners of 4- and 5-star funds rated by Morningstar.

If you are not comfortable trusting your money with companies you have never heard of, or you are looking to invest with one of the largest and most recognizable brokerage houses in the world, than Scottrade is an excellent choice. Low transaction costs and huge selection of mutual funds make it one of the best brokerages for mutual funds investors.

Read full Scottrade review.

Promotion link:  Get up to $2000 when you open new account or add funds to existing account.

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What Are Mutual Funds And How Do They Work

A mutual fund, in simple terms, is a way for people to invest in the stock market without having to worry about their own level of expertise in buying and selling stocks. Mutual funds allow investors to have a professional fund manager handle their investments, and do so in a way that protects the investor by ensuring that the fund is well diversified. Mutual funds are not for the short term investor, but for someone who plans to take a long term view toward investing their money.

Mutual fund companies have many types of funds available for the public and are managed by someone who is a professional in their area of expertise. Investment managers may manage securities such as bonds, money market funds or general securities. Being an expert in their field allows them to select stocks that they consider will help the portfolio grow.

Another advantage of using mutual funds for wealth management is that portfolio managers are usually privy to stock offerings that may not be available to the public. When a large company decides to go public, such as Facebook, mutual fund managers are usually the first to buy into the IPO. By the time the offering actually comes to market it is often completely sold out, leaving the small investor no chance to get in at the bottom.

There are two main types of funds that the average investor will use. One is an open end fund that allows investors to cash in their fund at any time, at the end of the business day. At that time the fund will have calculated its NAVs (Net Asset Value) and the investors worth may be liquidated at that time, either in whole or in part. This allows investors the ability to have cash available quickly, should the need arise. Many investors like having this kind of liquidity available to them.

The second type of common fund is a closed fund. Closed funds are comprised of shares that are offered to the public, usually through an IPO (Initial Public Offering). These shares are then bought and sold on the stock exchange, and any investor who wants to liquidate their position must then sell it through the market to another investor. Often these funds are sold at a "discount" and not at the Net Asset Value. This type of fund is also managed by a portfolio manager the same way as an open ended fund.

Mutual fund managers often have a number of different styles of investing. A wise investor, who is considering a mutual fund investment, should interview their fund manager to ensure that they are comfortable with the manager’s style of investing. This will also depend on your assessment of what you want your portfolio to achieve. There are number of different approaches and each come with their own risk/reward features.

Some managers take a basic fundamental approach and base their stock picks on the intrinsic value of the security. Intrinsic value can be affected by economic factors and how those factors may affect the company or the industry sector in general. In this instance a manager is looking for undervalued stocks that will rise over time, while watching stocks in the portfolio that may be overvalued.

Then there are managers that use a psychological approach. In this case the manager looks at the overall mood of investors and how they are influencing the price of stocks. This is a very emotional approach to the market. When markets are in flux, as they were in late 2008, investors who became anxious about the economic mood were likely to get out of stocks and go into cash or bonds. In this case they see stocks and bonds as a safer place to have their money until the market returns to normal. On the other side of this scenario is the bull market. People become euphoric and begin buying stocks because they want to get in to a bull market. At this time a fund manager may be selling over valued stocks in their portfolio.

These two styles of investment are common approaches to investing. There are also managers who look at the markets in a more academic way. They tend to view stocks by their intrinsic value which is assessed by looking at prices in the current market. This method is not a popular one and is still being evaluated by professionals.

Then there is the portfolio manager who has an eclectic style to managing their fund. They tend to take an approach that encompasses all of the above styles. They see weaknesses and strength in the above three approaches and look to exploit those that will work best for their fund.

Although it will take a bit of research, it's important to understand your level of risk before choosing a fund manager. Once you understand this, then you can search for a fund manager that will suit your style of investing as well as your risk level.

Updated on 11/20/2015.

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