Learning how to invest in mutual funds online is surprisingly simple. If you are new to investing there are a few preliminary things you need to determine that will make the transition to buying your mutual funds online simpler.

Develop a System for Deciding Which Mutual Funds You Should Buy

Every investor has her how approach, system, or philosophy for buying mutual funds.

When I first started investing in mutual funds (when I was 15 years old) my strategy was quite simple.  I set up an appointment with my parents financial advisor.  He suggested a fund and I decided to invest in that fund.  At the time I figured if his job was to make suggestions my job was to follow his suggestions.

The investment turned out to be a great decision, but I wouldnt recommend this strategy.

An alternative approach is to use analytical tools like Morning Star to help you pick mutual funds.  Some people look for funds with long positive track records.

Regardless of your strategy you need remember that the mutual fund types (small cap, large cap, international, etc) you invest in is a more important decision than the actual funds you purchase since this will have the biggest impact on your returns.  In fact, asset allocation is the most important investing decision youll make.

Some Christians chose to do more personal screening and prefer to stick with mutual funds that are faith-based .

Another helpful Christian organization is Sound Mind Investing.  Ive personally followed some of their strategies for probably about five years now.

Now that you know which mutual funds you want to buy youre in a position to choose an online brokerage .

This will be a very important decision as it will greatly impact how much youll pay for your mutual fund transactions.

Important Mutual Fund Brokerage Considerations

1. Online mutual fund brokerages dont carry every single mutual fund.  For example, if you want to purchase Delaware Smid Cap Growth Fund Institutional Class (DFDIX), you could purchase it if you had a brokerage account at Fidelity, but not if you had one at Charles Schwab.
2. Fund transaction fees vary from brokerage to brokerage.  Fidelity International Small Cap (FISMX) could be purchased from a Fidelity account with no transaction fees.  However, if you had a Charles Schwab account, you could expect to pay a fee to purchase the Fidelity mutual fund.

Since this is not an article on comparing or deciding between online brokerages I wont go into any more detail, but you will want to do some thorough research about fund availability and fund fees before deciding on an online brokerage.

A couple of the cheaper (and ChristianPF recommended) online brokers are Zecco & Sharebuilder each will allow you to start investing for as little as $50.

Now, (finally) youre ready to actually start buying mutual funds online.  Youve got a strategy in place for buying funds, and youve selected the brokerage that best compliments the types of funds youre interested in purchasing.

How to Buy Mutual Funds Online

Its actually quite simple now. While every online brokerage interface is different, here is a general procedure youll need to follow.

To access the correct place to buy mutual funds, youll likely click on a tab titled Trade or something similar.  Be sure you are in the part of the interface that is purchasing mutual funds.

Youll need to be prepared with the following information:

1. Symbol every mutual fund has a five letter symbol to help identify that fund.
2. The amount of dollars you want to invest.

Once youve indicated that you want to buy mutual funds and entered the Symbol and the amount, you simply need to confirm the transaction.  After youve placed your order, it will be put on hold until the end of the business day.  Mutual fund transactions only happen at the close of the market.  Whatever the price is when the market closes, then your order will be purchased to buy that amount of mutual funds at the closing price.

After your first time to purchase a mutual fund online, it should only take a minute or two to add any subsequent orders.

What tips do you have for people who might be interested in buying mutual funds online? Leave a comment below!