Best Brokers for Mutual Funds

Benzinga readers love Interactive Brokers as the best broker for mutual funds.

Regarding investment choices, it’s pretty safe to say that if you’re like many individuals, you’re looking for investments that can anchor you in safe waters, and at the same, can also make you lots of money. Mutual funds, if chosen carefully, can be a great way to invest and achieve both objectives. That's why you need to know about the best brokers for mutual funds.

Each investor is different, and you could be looking into a wide variety of tools and resources in a mutual fund broker. Once you know what you’re looking for, the breakdown below can serve as a helpful guide for finding a best-broker match for you based on mutual fund selection, skill level and financial situation. Here is Benzinga's list of the best brokers for mutual funds.

Best Brokers for Mutual Funds

When searching for the best brokers for mutual funds, you need to locate brokers that have a reputation and history of mutual fund investing. Here are some of Benzinga's favorites.

• Best Overall: Interactive Brokers
• Best for Versatility: E*TRADE
• Best for Long Term Investors: Magnifi
• Best Broker for Number of Options Available: Vanguard
• Best for No Load, No Transaction Fees: Charles Schwab

1. Best Overall: Interactive Brokers

Interactive Brokers offers access to 150 markets and serves clients in over 200 countries.

The IBKR Mutual Fund Advantage:

• 46,000+ funds from over 520 fund families including Allianz, American Funds, BlackRock, and Fidelity
• 18,000+ funds with no transaction fees
• Other funds available at low commissions with no custody fees
• Inside the US: The lesser of USD 14.95 or 3% of trade value
• Outside the US: EUR 4.95 or currency equivalent
• IBKR is neutral – no proprietary funds
• Free Mutual Fund Search tool to help you find the right funds
• Available worldwide

2. Best for Versatility: E*TRADE

When you work with E*TRADE, you likely arrived there because of their commercials. You might have considered investing in mutual funds and gotten a recommendation from friends or family. Either way, the platform offers several benefits, including:

• Quality trading platform with sophisticated tools
• Several tradable assets
• Superlative customer service
• Easy mobile trading
• Helpful tutorials
• Free mutual fund trades unless the $19.99 transaction fee is noted

With a recently reimaged website, E*TRADE allows you to invest every day, save for retirement or hold assets until you plan to expand your portfolio. This opens a portal to several powerful options that help improve your financial situation:

• Simple dashboard; user-friendly and logical
• Probability calculator
• Strategy optimizer
• Continuing education for traders

3. Best for Long Term Investors: Magnifi

Magnifi is a marketplace that allows you, as an investor, to use common brokerage tools and AI to make the best decisions for your portfolio. Because you can pull up all the information you need on a given asset, you can easily invest in the assets that will give you the results you deserve and better match your strategy.

Search for the investment options that meet your needs, invest in specific categories or scan for assets in a price range that’s affordable for you.

Best for long-term investors and those who require a bit of client support, you can also learn more about investing from this platform, utilize the AI-powered investing assistant, enjoy commission-free investing, try the mobile app and take advantage of over 15,000 possible investment options. This makes Magnifi a good place to trade for both seasoned and novice traders.

4. Best Broker for Number of Options Available: Vanguard

Vanguard offers over 16,000 mutual funds from leading fund families and NTF funds. Of these funds, Vanguard has you covered across the board when it comes to varying objectives, asset classes and risk exposure. More than 2,000 are no load, no transaction fee (NTF) funds. Expense ratios are well below 0.50%, and some are even below 0.10%.

5. Best for No Load, No Transaction Fees: Charles Schwab

A no transaction fee mutual fund (NTF) is a mutual fund that doesn’t charge trading fees. Typically, they’re bought directly from the mutual fund company or through a discount brokerage. Charles Schwab doesn’t have the most robust list of mutual funds at just over 5,000, however, the bulk of these mutual funds are transaction fee-free.

The 3,100 funds that have no load or no transaction fees actually make it one of the largest groups of no-load, no-transaction-fee funds among discount brokers. While it’s a hefty price to buy ($76, it’s $0 to sell Schwab’s mutual funds).

What are Mutual Funds?

In plain English, a mutual fund is an investment fund that pools money from many investors (including individuals, companies and other organizations) to purchase stocks, bonds and other securities. The reason for this collective approach is that this type of basket of securities (otherwise known as a portfolio) might be tough, if not downright impossible, to recreate on your own.

Just as all the currencies of the world are vastly different from one another, mutual funds can be quite different as well. Here are just a few possible mutual fund characteristics:

• Focused on long-term growth
• Focused on short-term growth
• Invested in stocks
• Invested in bonds
• A mix of both stocks and bonds

Why Might I Need a Mutual Fund?

You might be an investor who’s looking for a retirement vehicle, or maybe you’ve identified your goals and you know you want a short-term investment. Whatever your ultimate goals are, the biggest benefit to a mutual fund is that it’s automatically diversified. In other words, there’s less risk involved because of that giant pool of securities. If things go wrong in a company, other companies in a mutual fund portfolio might still do well, so the fund’s overall net worth, or net asset value, won’t be as negatively affected.

You also might need a mutual fund to achieve specific goals. If you’re planning on retiring at some point in your life, a mutual fund might be worth looking into. If you’ve got a short-term savings goal but can’t risk losing every penny, you might look no further than a mutual fund. There are so many reasons people choose mutual funds. And to be honest, some just aren’t aware of the differences and invest in the same thing Neighbor Bob invested in last month. (A bad idea, by the way.)

Mutual Funds Compared to Individual Stocks

How are mutual funds different than individual stocks? Mutual funds can be a conglomerate of stocks, and unlike a stock, mutual funds are diversified because you’re investing in a whole bunch of stocks at once. Standalone stocks are a major risk because you’re investing in 1 versus a whole group of them.

Pros and Cons of Mutual Funds

Besides diversification, there are several other pros for mutual funds. Unfortunately, mutual funds have a few downsides as well.

Pros:

• They’re professionally managed.
• They’re liquid.
• You can find anything to match what you’re looking for, including risk tolerance and investment horizon.

Cons:

• Management fees can be high.
• You’re locked in (depending on the type of fund you invest in, you could be locked in for a required amount of time, like five years).
• Operating expense fees can also cause your money to take a hit.

How to Look for Mutual Funds

When looking for mutual funds, there are several steps you can follow to make an informed decision. Here is a guide on how to look for mutual funds:

1. Define your investment goals: Before starting your search, determine your financial goals, risk tolerance, and investment time horizon. This will help you narrow down your options and choose funds that align with your objectives.
2. Research different types of mutual funds: Mutual funds come in various types, such as equity funds, bond funds, index funds, sector funds, and more. Understand the characteristics and risks associated with each type to find the ones that suit your investment needs.
3. Consider your risk tolerance: Evaluate your risk tolerance and determine whether you are comfortable with a higher risk and potential returns or prefer a more conservative approach. This will help you choose funds that match your risk profile.
4. Assess the fund's performance: Look at the historical performance of the mutual funds you are considering. Analyze their returns over different time periods, compare them to their benchmarks, and evaluate their consistency. It's important to note that past performance does not guarantee future results, but it can provide insights into how the fund has performed in different market conditions.
5. Analyze the fund's expenses: Mutual funds have various fees and expenses, including management fees, sales loads, and operating expenses. Consider these costs and evaluate whether they are reasonable compared to the fund's performance.
6. Review the fund manager's track record: Research the fund manager's experience, investment philosophy, and track record. A skilled and experienced fund manager can significantly impact the fund's performance.
7. Read the fund's prospectus: The prospectus provides detailed information about the fund's investment objectives, strategies, risks, fees, and historical performance. Read it carefully to understand the fund's investment approach and determine if it aligns with your investment goals.
8. Consider the fund's asset size and liquidity: Larger funds may have advantages in terms of resources and stability, but smaller funds may offer more flexibility and potential for higher returns. Additionally, consider the liquidity of the fund, especially if you may need to redeem your investment quickly.
9. Diversify your portfolio: Consider how the mutual fund fits into your overall investment portfolio. Diversification across different asset classes and investment styles can help reduce risk.
10. Seek professional advice if needed: If you are unsure about selecting mutual funds or need personalized guidance, consider consulting with a financial advisor who can provide expert advice based on your specific financial situation and goals. By following these steps, you can effectively look for mutual funds that align with your investment objectives and risk tolerance. Remember to regularly review and monitor your investments to ensure they continue to meet your needs over time.

Discount vs. Full-Service Brokerage for Mutual Funds

If you’re trying to decide between a discount or full-service brokerage, there are a few differences. And of course, it depends on what you’re looking for. Brokerage accounts allow you to buy and sell stocks, bonds, ETFs and more (mutual funds are included in this list). In contrast, full-service brokers offer more products and services, including planning for retirement, tax advice, and portfolio review.

Because services are more comprehensive, typically, fees are a bit higher with full-service brokerages. If you feel you need more hand-holding, a full-service broker might be what your life is missing. However, if you crave speed and a mutual fund on the cheap, you know you’re better off with a discount broker. Here are a couple of other things to consider:

1. Fees. Fees aren't the only consideration, but they should be a part of your decision-making process.
2. Your goals. Your goals should also be a major consideration in your decision to invest in a mutual fund. What is your time horizon? When will you need your money?
3. Load and no-load mutual funds. A loaded mutual fund typically charges a front-end or back-end load or cost, or a percentage of the amount invested, usually one to five percent. It’s a good idea to get a sense of what those fees will entail.

Find Your Best Broker for Mutual Funds

Take time to find a broker that meets your needs, and your trading process is sure to go more smoothly. There is a platform for every investor, and each has its own unique offering of tools and resources to support you.

Get started now with 1 of our recommended brokers for mutual funds.

Want to learn more about mutual fund investing? Check out Benzinga's guides to the best no-load mutual funds, the best socially responsible mutual funds and the best technology mutual funds.

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