by Silicon Valley Blogger on 2010-02-26 4

A look at top investment brokers for the mutual fund crowd.

If you own mutual funds, its quite possible that you are paying more than you need to in mutual fund fees. This is according to Lipper, Inc. a large mutual fund research company. But by understanding what the various fees are that are associated with mutual fund investing, youll be able to compare mutual funds, fund companies and online stock brokers and make the right decisions for your investment money. So lets take a look at how fees are charged at some brokerages.

Below, we offer a short list of places where you can find resources on mutual funds, ETFs and stocks. You can find solid mutual funds and index funds at the following top investment brokers. Any fees we list are brokerage transaction fees only. For specific mutual fund fees, youll need to check the prospectus of any fund you are considering.

Top Investment Brokers For Mutual Fund Investing

A Quick Look at Mutual Fund Fees

Note that when you buy a mutual fund, you may be subject to several types of fees:

• Ongoing maintenance fees that are charged on an annual basis (e.g. Annual Fund Operating Expenses). These operating expenses include management fees, distribution (12b-1) fees, and some other miscellaneous fees.
• Transaction fees are charged when you purchase, redeem or exchange your fund shares. These fees are known as loads (e.g. Shareholder Fees). Shareholder Fees cover sales loads, redemption fees, exchange fees, account fees or purchase fees. There are front, back and constant loads as well (the latter is charged on a regular basis).

There are a variety of fees that apply to the promotion and management of mutual funds. Some fees go to pay the funds management and other fees pay the broker through which the funds are being offered. Youll want to check your prospectus carefully and study the costs associated with a new fund before you open an account.

Case Study: Scottrades Mutual Fund Commissions

To get some idea on how fund and brokerage fees are charged, Ill go through an example discussing how Scottrade sets its commissions and pricing. When you consider a particular fund through Scottrade, here are the considerations youll have to make:

• Find out if the fund is a Load Fund or a No Load Fund. Youll need to know if the fund has a front load (where you pay a percentage of your purchase when you buy shares) or a back load (where you pay a percentage when you sell your shares). For more information, you should check the funds prospectus.
• Find out if the Fund belongs to the brokers No Transaction Fee Fund (NTF) program. A transaction fee is the commission you are charged by the broker (in this case, Scottrade), which is associated with certain mutual funds at the discretion of the broker. A fund may belong to the brokers NTF program depending on their arrangement with the broker. If you buy into an NTF fund, you typically dont pay a brokerage commission.
• For management fees and expense ratios, youll need to check the funds prospectus for the details.

Parting Thoughts

The aforementioned financial institutions and sites also hold a wealth of information on investing. For those who are long term investors, I would suggest checking out discount brokers like Scottrade. E*Trade. Sharebuilder or Charles Schwab. For these online brokerages, youll need to watch out for fees on broker-assisted trades, which can be ridiculously high. But note that those investment brokers with flat fees tend to be much more reasonable on this front.

For more active and adventurous traders, sites like TradeKing. OptionsHouse. optionsXpress and tradeMonster may be more your cup of tea. You can also purchase mutual funds at fund companies, such as Vanguard and Fidelity. These companies also have brokerage arms that can suit your requirements.

The bottom line is that you should know your goals before you start investing so that when you open a brokerage account, it will be with the right entity that should be able to serve you best.