The Best Way To Buy A Mutual Fund

Lots of people are in the market to buy mutual funds on a daily basis. They are constantly searching for funds that meet all of their investment needs. While I have gone over the things to look for when picking a mutual fund; I have never addressed exactly how to go about buying a mutual fund. So, where is the best place to purchase a mutual fund?

Lots of brokerage houses and online brokers offer funds for sale. TD Ameritrade, E*Trade, Scottrade. Fidelity, and Charles Schwab offer thousands of different funds. Although these brokers have a plethora of fund options, they are not the best place to buy a mutual fund.

In all of my years of investing, I have found that the mutual fund company itself is the best place to buy a mutual fund.

Fund companies offer several advantages that brokers just cannot match.

No Purchase Fees

There is no charge for buying funds from a fund company. Visit any of the major mutual fund company websites and you can start investing today at no charge. All you have to do is meet the funds minimum to open an account. Brokers typically charge fees of $29.99 or more to buy a mutual fund. This is a commission that is paid out to the brokerage house. Why should you pay a fee to a middleman when you can buy shares of a mutual fund yourself for free?

Just visit the website of the fund that you would like to buy and submit an application. Its that easy.

Lower Minimum Balance Requirements

Mutual fund companies typically require lower minimum payments than brokerages. Investing in a mutual fund can be an expensive proposition. Some fund companies require $2,500 or $5,000 for a minimum investment. Some companies are even higher than that. There is an alternative. You can enroll in an asset account building program at some fund companies. These programs allow you to contribute $50 or more a month and build your account up to the minimum level. This is a great program for the beginning investors.

There is no such thing as an account building program at a brokerage house. The required minimum has to be paid in order to participate in the fund.

No Redemption Fees

Buying more shares direct from a fund company saves you from having to pay a brokerage fee every single time that you add shares to your account. This can be a costly proposition at a broker. Who wants to pay $9.99 every time that they add $100 or $200 to a portfolio? Withdrawing funds will cost you as well at a broker. Shares of a no load fund that are bought or sold from the fund company have no fees attached. This lowers your expenses and keeps more cash in your mutual fund.

Online brokers have their place but not when it comes to mutual fund investing. Stick with the cheapest option available and buy shares from the mutual fund company.