Mutual funds are the investing world’s two-for-one: a single product with built-in diversification designed to achieve a specific investment objective. Each mutual fund can hold shares of hundreds of companies and can target goals like exposure to global markets, midsized growth companies or businesses operating in a particular industry.
You get all that with a single click of the “buy” button. But first you have to decide where to shop. Some companies sell their mutual funds directly to consumers. Most use a middleman to handle the transaction, either a retirement plan administrator that runs workplace accounts like 401(k)s or a broker where investors set up personal accounts like IRAs.
For individual investors looking to buy mutual funds on their own, the best broker is the one that has the range of fund offerings and resources you want at the most favorable terms. To help you narrow the field, here’s NerdWallet’s roundup of the top dogs in a variety of categories.
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.
- Offers more than 3,000 no-transaction-fee funds. See our Charles Schwab review.
- Mutual fund commission: $0 for NTF funds; $76 per trade for all others.
- Account minimum: $1,000; waived with monthly auto-deposits of $100 or more; fund minimums set by fund companies.
- Promotion: 500 commission-free trades for new accounts of $50,000 or more.
- Has more than 5,000 no-transaction-fee funds. See our Merrill Edge review.
- Mutual fund commission: $19.95 for no-load transaction fee funds.
- Account minimum: $0; fund minimums set by fund companies.
- Promotion: Cash bonuses ranging from $100 for accounts of $20,000-$49,999, to $600 for $200,000 or more.
Charles Schwab brought online discount investing to the masses, and it appears on many of our “best brokers for …” lists, including best brokers for IRAs, exchange traded funds and beginners. In the realm of mutual fund investing, the company is strong on all fronts. Schwab offers more than 3,000 no-transaction-fee mutual funds, within which investors pay no commission for purchases, and it helps investors whittle down the massive list of funds to find the best match.
The standout feature for mutual fund investors is Schwab’s Mutual Fund OneSource platform. With as little as $100, customers can start investing in some of Schwab’s fund offerings, and they can make subsequent investments of as little as $1.
Where the company falls short is with its steep $76 commission for funds that aren’t on its no-fee list — a good deterrent for anyone considering straying outside the lines.
When it comes to affordability and array of fund choices, Merrill Edge earns every one of its 4½ out of 5 stars rating. It offers an impressive list of 5,000-plus NTF funds. It charges a $19.95 commission for funds that aren’t on the list, very low compared with most brokers. Its account minimum is $0, although individual funds set their own minimums.
Merrill Edge also offers an impressive array of mutual fund research. Morningstar and Lipper provide mutual fund reviews and rankings, and Merrill’s own investment professionals evaluate and rank the top Merrill Lynch Select Funds in each category. Merrill Edge offers no commission-free exchange traded funds — a big shortcoming if that’s part of your investing strategy outside of mutual funds and individual stocks.
Biggest selection of no-transaction-fee funds
Merrill Edge and Fidelity offer the largest selection of NTF mutual funds, ideal for investors who want to shop around.
- Has more than 5,000 no-transaction-fee funds. See our Merrill Edge review.
- Mutual fund commission: $19.95 for no-load transaction fee funds.
- Account minimum: $0; fund minimums set by fund companies.
- Promotion: Cash bonuses ranging from $100 for new accounts of $20,000-$49,999, to $600 for $200,000 or more.
- Offers more than 3,400 no-transaction-fee funds. See our Fidelity Investments review.
- Mutual fund commission: $49.95 to $75 for funds not on the NTF list.
- Account minimum: $2,500 ($0 for rollover IRA or automated $200/month for Roth and traditional IRA); fund minimums set by fund companies.
- Promotion: Get up to a 10% IRA match on future contributions with qualifying rollover.
It can be hard to build a well-rounded portfolio when your choices are limited. That’s often the case in workplace retirement plans, where participants have only a dozen or so mutual funds to choose from. Fund investors seeking more variety should take a stroll down the well-stocked aisles at Merrill Edge and Fidelity Investments, which each earned a five-star rating from NerdWallet in the NTF funds category.
As mentioned above, Merrill Edge offers the mother lode of NTF mutual funds — more than 5,000 — while Fidelity has roughly 3,400. Schwab and TD Ameritrade are no slouches in this category, either, with healthy lineups of NTF funds — about 3,000 and 2,000, respectively.
Side note for ETF investors: The equivalent of NTF funds are commission-free ETFs, where the 200-plus selection at Charles Schwab and OptionsXpress are worth checking out. See our review of best brokers for ETF investors for more details and our reviews of other discount brokers.
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.
- 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 $35 for non-Vanguard and select funds.
- Account minimum: $1,000 for IRAs and $3,000 for non-retirement accounts; fund minimums set by fund companies.
- Competitive commissions (on funds and stock trades) and no account minimum to get started. See our TradeKing review.
- Mutual fund commission: $9.95 for no-load funds; $0 for funds that charge a load.
- Account minimum: $0; fund minimums set by fund companies.
- Promotion: $1,000 in free trade commissions for new clients with a balance of $5,000 or more.
For mutual fund investors, keeping wealth-eroding fees at bay requires posting a sentry at two fronts. One soldier needs to guard against high brokerage account fees. These include:
- Commissions on purchases and sales.
- Administrative fees for things like inactivity and full or partial transfers out of the account.
- Early redemption fees for selling out of a fund in the first 60 to 90 days.
The other sentry needs to be alert to fees within the mutual funds themselves — the expense ratios and front- and back-end “loads,” or fees.
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%. If you have a brokerage account at Vanguard, you’ll pay a $0 commission on Vanguard funds, $8 for Flagship funds, $20 for Voyager/Voyager Select funds and $35 for non-Vanguard funds. Other brokerages sell Vanguard’s mutual funds, too, so consider the availability of the company’s funds as you shop around.
TradeKing stands out for its rock-bottom mutual fund commissions: just $9.95 to buy no-load mutual funds and $0 for any funds that charge a load, compared with the $49-plus commission that many brokers charge. (That said, retirement investors shouldn’t change mutual funds like they’re socks.) If the funds you want to buy are not on any broker’s NTF list, TradeKing’s low commissions are a good option. TradeKing doesn’t charge account fees as long as you — or your household, if you have multiple accounts — have at least a total $2,500 account balance and execute at least one trade per year. Otherwise there’s an annual $50 inactivity fee.
Also worth a look in the low-cost category is Charles Schwab’s Mutual Fund OneSource platform. This is where you’ll find the broker’s NTF funds for which as little as $100 gets you started in a retirement, brokerage or custodial account and where you can make subsequent investments of as little as $1.
Best fund research and tools
Investors will appreciate free access to investing tools and fund recommendations at these brokers.
- Independent research and recommendations in more than 45 fund categories. See our TD Ameritrade review.
- Mutual fund commission: $49.95 for funds not on the NTF list.
- Account minimum: $0; fund minimums set by fund companies.
- Promotion: Cash bonuses ranging from $100 for new accounts from $25,000-$99,999, to $600 for accounts of $250,000 or more, with qualifying rollover.
- Free access to tools and data from Morningstar and Lipper. See our Fidelity Investments review.
- Mutual fund commission: $49.95 to $75 for funds not on the NTF list.
- Account minimum: $2,500 ($0 for rollover IRA or auto-deposit of $200 a month for Roth and traditional IRA); fund minimums set by fund companies.
- Promotion: Get up to a 10% IRA match on future contributions with qualifying rollover.
Getting extensive data at no additional cost is like finding a free all-you-can-eat buffet at what’s normally a pricey a la carte restaurant. That’s what investors get at TD Ameritrade. Its quarterly mutual fund Premier list is compiled by Morningstar and provides independent recommendations for NTF mutual funds in more than 45 categories, which helps investors whittle down the prospects among the company’s 2,000 NTF offerings.
At Fidelity, customers have access to a full suite of research tools from more than 20 providers, including Morningstar and Lipper ratings. And it’s free. The broker also offers online and in-person customer service and educational support, including free investor seminars at branch locations across the country.
Best brokers for the hands-off fund investor
Vanguard and E-Trade Adaptive Portfolio have services that will build your mutual fund portfolio with your input.
- Offers investors the ability to 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 0.20% to 0.45%.
- Account minimum: $10,000 for E-Trade Adaptive Portfolio.
- Promotion: No management fee for 2016, plus $100 to $1,500 bonus depending on account size.
- Portfolios created by advisors on an individual basis. See our Vanguard Personal Advisors Services review.
- Account management fee: 0.30%.
- Investment expense ratios: 0.05% to 0.19%.
- Account minimum: $50,000 for Vanguard Personal Advisor Services.
There are four main ways to build a diversified portfolio based on mutual funds or ETFs:
- Manage your own investments.
- Hire a personal financial advisor to do it all for you.
- Invest in a target-date mutual fund.
- Use an automated service, or robo-advisor guided by computer algorithms to run the show and pick the funds for you.
If managing your own portfolio seems daunting or hiring a financial pro is too pricey but you still want some control over your investment choices, now there’s a middle ground: a hybrid of the DIY and robo-advisor model.
What makes E-Trade Adaptive Portfolio different from other robo-advisors is that instead of limiting your portfolio to index-based ETFs, you can customize your portfolio by including actively managed mutual funds. E-Trade’s $10,000 minimum is higher than at most robo-advisors, but it gains you access to a higher level of service — a dedicated team of registered financial consultants to answer questions and offer guidance.
The next step up is services that pair automated portfolio management with a dedicated human financial advisor. The price of entry is steeper, but the personal touch can be extremely valuable, particularly if you’re rolling money into an IRA from a former workplace retirement plan. If you can meet Vanguard Personal Advisors Services’ $50,000 minimum, you’ll get a portfolio that is subsidized, at least in part, by the low-fee Vanguard funds. The company’s 0.30% management fee is in line with the robo-advisor competition. Another option for a $25,000 account minimum is Personal Capital, although fees are tiered based on account balance, and those with less than $1 million pay 0.89%.
If those minimums are too steep and you’d rather not go completely DIY, a target-date retirement fund is a popular choice for hands-off investors. They’re based on age; for example, someone who is 30 today and wants to retire in 35 years would buy a fund with a target date of 2051. These funds automatically rebalance holdings to more conservative investments as the retirement day draws near.
Here, too, Vanguard is a standout. According to a Morningstar report on Vanguard’s target retirement series, the company earns a gold analyst rating thanks to the boost in performance it gets by being a low-cost leader with an asset-weighted expense ratio of just 0.14%. With its low commissions for certain Vanguard funds and free dollar-cost averaging into no-load NTF funds with a minimum $100 investment and two subsequent transactions, Vanguard is worthwhile for investors looking for a long-term committed relationship. (See the details about Vanguard accounts above.)
|
Broker
|
Best
for |
Highlights
|
Commiss-
ions |
Promotion
|
Account minimum
|
Start investing
|
|---|---|---|---|---|---|---|
 |
Overall
|
Large choice of NTF funds; allows small-dollar additional investments
|
$0 for NTF funds; $76 per trade for others
|
500 commission-free trades
|
$1,000; fund minimums set by individual funds
|
|
 |
Overall
+ No-transaction-fee funds |
5,000 NTF funds; low fund commissions
|
$19.95
for no-load transaction fee funds |
$100 to $600 cash bonus
|
$0; fund minimums set by individual funds
|
|
 |
No-transaction-fee funds
+ Fund research |
3,400 NTF funds
|
$0 for NTF funds; $49.95 - $75
for others |
Up to 10% match on future contributions with rollover
|
$0 for rollover IRAs or automated $200/month IRA deposit; $2,500 for non-IRA accounts
|
|
 |
Low costs
|
Industry's low-cost fund leader
|
$0 for Vanguard funds; $8-$35 for non-Vanguard and select funds
|
N/A
|
$1,000 for IRAs, $3,000 for other accounts; individual funds set own minimums
|
|
 |
Low costs
|
Competitive commissions, no account minimum
|
$9.95 for no-load funds; $0 for load funds
|
$1,000 in free trade commissions (balance of $5,000+)
|
$0; fund minimums set by individual funds
|
|
 |
Fund research
|
Extensive fund research; 2,000 commission-free funds
|
$0 for NTF funds; $49.95 for funds not on NTF list
|
$100 to $600
cash bonus |
$0; fund minimums set by individual funds
|
|
 |
Hands-off investing
|
Offers hybrid fund/ETF automated portfolios and allows customization
|
0.30% account management fee; 0.20% to 0.45% hybrid portfolio expense ratios
|
No management fee for 2016; $100-$1,500 bonus based on account size
|
$10,000 for E-Trade Adaptive Portfolio
|
|
|
|
Hands-off investing
|
Portfolios created by advisors on an individual basis
|
0.30% account management fee; 0.05 to 0.19 expense ratios
|
N/A
|
$50,000 for Vanguard Personal Advisor Services
|
Dayana Yochim is a staff writer at NerdWallet, a personal finance website: Email: dyochim@nerdwallet.com. Twitter: @DayanaYochim.
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