Best mutual fund brokers

Best Online Brokers For Mutual Funds




Ally Invest, formerly TradeKing, offers mutual fund investors several major benefits. First is the broker’s handy fund screener. It returns 8,098 products that are available for purchase by new investors. Of these, 1,672 come with no load.

The screener is able to search for funds based on a variety of criteria, including return history, expense ratio, asset class, fund family, minimum investment, dividend yield, manager tenure, and more. Results can be sorted by any of the variables that were used in the search. Buy and sell links are also displayed in a screener’s results.

Clicking on the fund’s name will take you to the fund’s profile page. Here, there is a lot of detailed information about the security. There are fund rankings from Lipper. Most brokers either don’t provide rankings or provide data from Morningstar. So Ally is unique here.


Best Mutual Fund Brokers


Also available is detailed information on a fund’s holdings, including stocks and sectors. Price performance is shown for each of the top ten holdings. Also shown is the total number of holdings. Fund highlights show load status, dividend ex-date, total assets, and minimum IRA investment. The fund’s turnover rate is also shown.

Ally has kept Ally Invest’s pricing on mutual fund trades. Every fund at Ally has either a transaction fee or a load. If a fund has a load, there is no transaction fee. If a fund doesn’t have a load, the broker charges $9.95 for both purchases and sales - the lowest mutual fund commission among online brokers. Ally Invest is one of the very few brokers in the industry not to charge a short-term redemption fee when a fund is sold soon after purchase.

Compared to other brokers, Ally Invest beats most of them in the mutual fund arena. Its offering of 8,000 funds is larger than Merrill Edge (3,600), but smaller than TD Ameritrade, who has over 11,000. It's mutual fund commission is the lowest in the industry. No redemption fee on selling mutual sets the broker apart from almost all competitors.

In 2018 Ally Invest 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 Ally Invest review.

Promotion link:  Up to $3,500 cash bonus + commission free trades for new accounts.


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TD Ameritrade is one of the top 3 largest, best-known, and most established brokerage houses in the United States. It offers simple, flat rate commission plan with no surcharges. No-load mutual fund transactions are priced at steep $49.99. However, the firm offers over 3,000 commission-free no-load mutual funds, also known as NTF funds, that investors could buy and sell without paying a dime. TD Ameritrade does not charge hidden fees, as well as IRA setup, maintenance and account inactivity fees.

TD Ameritrade provides one of the largest selections of mutual funds - over 13,000. Of these, 3,888 have no transaction fee, and a further 3,714 also carry no load. This selection is one of the largest among on-line discount brokers. WellsTrade customers, for example, have access to less than 10,000 funds in total. Out of this amount, only 2,513 have no load and no transaction fee. Merrill Edge provides only 3,614 funds total, with a paltry 824 carrying no transaction fee and no load.

TD Ameritrade’s mutual fund screener is easy to use and offers several important criteria that can be used to narrow down a fund search. These variables include Morningstar category, socially responsible status, SEC 30-day yield, R-squared, Sharpe ratio, and more. By comparison, it is easier to use than Firstrade’s screener, and it’s easier to find on the site than Vanguard’s.


Best brokerage for mutual funds


There are many fund families available to TD Ameritrade clients. The broker’s screener returns funds from Allianz, Voya, American Beacon, BlackRock, American Century, Wells Fargo, JP Morgan Chase, and many others. Sorting through all of these products is fairly simple. A screener’s results can be sorted by all of the input variables mentioned earlier. Convenient buy and sell buttons are also displayed in the results.

TD Ameritrade provides very extensive educational information on mutual funds. Clicking on a fund’s name in a screener’s results produces the fund’s profile page. Here, users will find a wide variety of information, including the fund’s prospectus, most recent NAV, current distribution yield, expense ratio, Morningstar ratings, top ten holdings, and a pdf summary of the fund. A chart of the fund’s performance is available as well. A comparison can be made to the S&P 500, the category average, and an appropriate index.

A fund’s profile page also shows the fund’s category, net assets, and important information on asset allocation. The fund’s loads and fees, if any, are shown in detail. Icons also clearly show if a fund has a load or transaction fee.

There is an educational section on the broker’s website. Information on mutual funds is available here. Resources include individual videos and playlists.

TD Ameritrade is an excellent choice for investors looking to invest only with one of the largest and most recognizable brokerage houses in the world. Top rated trading, investment research, and IRA planning tools as well as huge offering of mutual funds make TD Ameritrade one of the best brokerages for mutual funds investors.

Read full TD Ameritrade review.

Promotion link:  Trade free for 60 days + get up to $600.


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Brokers Mutual Funds Pricing Comparison


Broker
Review
Broker
Rating
Mutual Funds
Commissions
Account Maintenance,
Inactivity Fees
IRA Setup
and Annual Fees
Ally Invest
Ally Invest rating

$9.95 $0 $0
Firstrade
Firstrade rating

$9.95 $0 $0
Tradestation
Tradestation rating

$14.95 $0 $35
Interactive Brokers
Interactive Brokers rating

$14.95 $3601 $30
Etrade
Etrade rating

$19.99 $0 $0
Merrill Edge
Merrill Edge rating

$19.95 $0 $0
Capital One Investing
Capital One Investing rating

$19.95 $0 $0
ChoiceTrade
Choicetrade rating

$25 $601 $75
Sogotrade
Sogotrade rating

$25 $0 $30
Vanguard
Vanguard rating

$35 $201 see
WellsTrade
Wellstrade rating

$35 $601 $30
Muriel Siebert
Muriel Siebert rating

$35 $551 $301
USAA Brokerage
USAA rating

$45 $0 $0
TD Ameritrade
TD Ameritrade rating

$49.95 $0 $0
Fidelity
Fidelity Investments rating

$49.95 ($75 for some funds) $0 $0
Charles Schwab
Charles Schwab rating

$76 ($0 to sell) $0 $0
Motif Investing
Motif Investing rating

Not offered $0 $0
RobinHood
Robinhood Trading rating

Not offered $0 $0
SpeedTrader
Speedtrader rating

Not offered $1201 $60

1 - fees are charged if certain conditions are not met; visit broker reviews for the full list of fees.


Mutual Funds at Online Brokers


If you’re going to invest in mutual funds, you first need to be aware of certain mutual fund characteristics that affect how much it will cost to own them, and then eventually to sell them.


Expense Ratios


First on the list is a fund’s expense ratio. A fund has to be managed, and this costs something. Every quarter (every three months) a fund deducts a percentage of your assets. This percentage is multiplied by four to arrive at the annual figure, which is the number that is publicized. In the past, mutual fund expense ratios were often near 2% or even higher.

In recent years, there has been a push in the industry towards lower fees, and this movement has brought many expense ratios down under 1%. Nevertheless, mutual funds still tend to have higher expense ratios than ETF’s, which can boasts annual costs of less than 0.5%. Some exchange-traded funds charge less than 10 basis points.

The higher a fund’s expense ratio, the more it costs to own the asset, especially over the long term. Remember, a stock has no expense ratio, so owning a mutual fund instead can add up over time.

As an example, let’s take a look at WACTX, the Wells Fargo Alternative Strategies Fund. The investment has a gross expense ratio of 4.10%, but offers discounts to bring the fee down to 2.96%. At this rate, a $10,000 investment that returns 6% per year will cost $4,417.03 at the end of ten years, just for the expense ratio! Over one decade, an individual stock would be more than $4,000 cheaper to own.

As already mentioned, not all mutual funds today charge this amount. Some index mutual funds charge much less. SWPPX, the Schwab S&P 500 fund, charges just 3 basis points, a fantastic deal. Instead of $4,000, the fund would cost just $50.62 over one decade, assuming a 6% annualized return.


Transaction Fees


The cost to buy or sell a mutual fund, known as a commission or transaction fee, must also be considered before making an investment. Brokers typically charge a trading fee to buy, and sometimes to sell, a mutual fund. Although this practice is common in the industry, so are no-transaction-fee funds. Many brokers have a select list of funds that can be traded without paying any commissions.

Let’s take a look at WellsTrade. The broker-dealer has 9,785 funds that are available for purchase. Of these, approximately 2,400 come with no transaction fee. Funds that aren’t on this short list cost $35 to buy, sell, or exchange. Placing the trade over the phone with a live representative costs an additional $25.

Schwab charges $76 to buy transaction-fee funds, but selling is free. Using its automated phone system to make a trade costs nothing extra, although using a live agent is an additional $25. There are 5,753 mutual funds available for purchase, a much smaller list than WellsTrade’s. But Schwab offers 3,485 without commissions, a larger selection than WellsTrade’s no-fee list.


Redemption Fees


Brokerage firms often charge short-term redemption fees if you sell a no-transaction-fee fund within a certain amount of time after purchase. After all, the broker has lost money by not charging a commission on the initial mutual fund trade, and the company has to make money somehow. Because frequent trading in and out of mutual funds increases underlying transaction costs inside the funds, it’s important to make mutual funds long-term investments. Short-term redemption fees are one way to do that.

Keep in mind that a particular fund can also charge a short-term redemption fee, and this will be in addition to any short-term trade fee the brokerage house charges.

Let’s take a look at TD Ameritrade as an example. The broker-dealer charges $49.99 for any NTF mutual fund when it is sold in less than 180 days after purchase. Some of the funds on its NTF list also charge their own fees for quick trades.

For example, the T. Rowe Price Real Estate Fund (TRREX) charges 1% of sale proceeds if the fund is liquidated in less than 90 days after purchase. This surcharge would be on top of TD Ameritrade’s $49.99 fee.

Not all broker-dealers charge this amount. In our survey, we found Merrill Edge charging $39.95, and the company’s time limit was just 90 days, half as much as TD Ameritrade’s.


Loads


Finally, we come to loads, which are required with some funds. A load is a percentage-based fee that is paid to buy or sell the fund. So-called ‘front-end’ loads are assessed when you purchase shares of a fund; and ‘back-end’ loads are charged when you sell shares.

Fortunately, not all funds do this. They are called ‘no-load’ funds. They are easy to find using your broker’s mutual fund screener. There should be a method to search for no-load funds.

Funds that do charge a load must specify in writing how the load is assessed (front end or back end) and how much the fee is. This will all be spelled out in a fund’s prospectus, which is a legally-required document. Be sure to read this before making a purchase.

Some front-end loads can be as high as 5%, although some fund families will provide break-point pricing. This means if you invest a minimum amount, say a million dollars, the load will be reduced or eliminated.

On the back-end side, holding a fund a minimum length of time, such as 1 or 5 years, can reduce or eliminate the load. Again, be sure to read the prospectus of any fund you’re interested in for details.


Summary


It costs money to invest in mutual funds. Be sure you know the details of what you’re buying before submitting an order.


Updated on 3/12/2018.