Best online brokers for mutual funds in November 2020

Originally posted by James Royal on Bankrate .com
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You know you want to purchase mutual funds to plan for your retirement or another big goal. But deciding where to go to buy mutual funds can feel dizzying.

First things first: Personal finance experts recommend buying the funds directly from the mutual fund company rather than through a brokerage account. Why? You’ll save money on fees. The exception, of course, is if that brokerage account is through the mutual fund company. For example: Buy Fidelity funds from Fidelity Investments and Vanguard funds from The Vanguard Group and so on.

Next, you’ll want to look for what kind of tools the broker makes available, what mutual funds are on its platform, what the broker charges, including early redemption fees, and other factors. On costs, expect to pay a higher expense ratio for actively managed accounts — which are managed by a person or a group of people who are picking the investments and trying to beat the market — versus an index fund, which is built to replicate the performance of a specific market.

Here are the best online brokers for mutual funds:

Overview: Top online brokers for mutual funds in November 2020

Fidelity Investments: Best overall

Fidelity Investments launched four zero-fee funds in the summer of 2018 — making it the first financial company to offer mutual funds with zero expense ratios in the ongoing price war. The funds are: Fidelity Zero Total Market Index Fund, Fidelity Zero International Index Fund, Fidelity Zero Large Cap Index Fund and Fidelity Zero Extended Market Index Fund.

You won’t have to pay management fees on these zero-fee funds because the funds don’t charge fees. And all Fidelity funds have no transaction fees as long as you hold the fund at least 60 days. 

The Boston-based retirement giant, which has long had a name in the mutual fund space, also offers more than 3,500 no-transaction-fee mutual funds. The other good news? Fidelity no longer requires a minimum for opening a brokerage account. Previously, it required you to put in $2,500.

Using the long-established broker, you’ll get access to a lot of research, screening tools and its namesake mutual funds, such as its iconic Magellan fund. You can also port in all of your financial accounts on its so-called full-view feature to understand all of your finances in one place, much as you might on a budgeting app like Mint.

  • Minimum amount to open an account: $0
  • Standard pricing: $49.95 on the buy and $0 to sell + free for Fidelity funds
  • Mutual fund highlight: Offers four zero-fee index funds, more than 3,500 no-transaction-fee mutual funds

Charles Schwab: Best for low-cost investing

Charles Schwab is credited for pioneering low-cost investing in the 1970s, and the company’s pricing remains competitive to this day.

At Charles Schwab, you’ll have a wide selection of mutual funds that don’t charge sales commissions. The discount brokerage firm offers more than 4,200 no-load, no-transaction fee mutual funds.

However, the fee is steep if you move outside of those funds: You’ll pay up to $76 per purchase, though it typically charges $49.95. Like many rivals, Schwab does not require a minimum to open an account or get started.

The brand is applauded for its stellar customer service and its robust online brokerage platform that is brimming with research.

  • Minimum amount to open an account: $0
  • Standard pricing: $49.95 when buying funds outside of the family; otherwise, $0
  • Mutual fund highlight: More than 4,200 no-load, no-transaction fee mutual funds

E-Trade Financial: Best for research and tools

In May 2018, the popular fintech trading app Robinhood eclipsed E-Trade Financial in number of users. But E-Trade Financial’s platform offers something Robinhood does not: mutual funds.

More precisely, E-Trade, which was founded in 1982, makes available more than 4,600 no-load, no-transaction fee mutual funds. That list includes more than 110 Vanguard funds, from one of the low-cost leaders in the space.

If moving outside of these no-transaction fee funds, E-Trade charges a $19.99 commission, a price that falls in the middle of its rivals.

At E-Trade, you’ll also have access to research and tools to help you make investment decisions.

(Morgan Stanley has purchased E-Trade, and is operating the broker as a separate unit.)

  • Minimum amount to open an account: $500
  • Mutual fund commission: $19.99 on no-load, transaction-fee funds
  • Mutual fund highlight: More than 4,600 no-load, no-transaction fee mutual funds

Ally Invest: Best for digital experience

Ally Invest is a lesser-known brand name, but don’t ignore it as a possibility.

As a company without branches, Ally focuses a lot of its attention on its digital experience. Ally Invest’s sister brand, Ally Bank, wins many accolades, including Kiplinger’s best internet bank in 2020. The company is also well regarded for its customer service.

Ally Invest, which was created out of Ally Financial’s purchase of TradeKing in 2016, offers access to more than 12,000 mutual funds. The commissions Ally Invest charges on mutual funds are considerably cheaper when compared to competitors. The platform charges $9.95 to buy and sell no-load mutual funds, while funds with a sales load can be bought and sold for as cheap as $0.

  • Minimum amount to open an account: $0
  • Mutual fund commission: $9.95 on no-load funds
  • Mutual fund highlight: The mutual fund commission is cheaper than many of its rivals

The Vanguard Group: Best for available options

Formed in 1975, The Vanguard Group has long been celebrated for its low-cost index funds.

Its legendary founder, John C. Bogle, is credited with launching the first index fund for retail investors. That fund is now called the Vanguard 500 Index Fund.

As a Vanguard client, you won’t pay transaction fees for the 130 Vanguard mutual funds. The firm also offers more than 3,000 no-transaction-fee mutual funds for non-Vanguard funds. You’ll pay $8 to $20 per trade for the other funds available on its platform, though accounts with more than $1 million in Vanguard funds receive their first 25 trades for free.

Even though it is known for index investing, Vanguard also offers actively managed funds.

  • Minimum amount to open a brokerage account: $0
  • Standard pricing: Free for family funds; $0-$20 for others, depending on Vanguard assets
  • Mutual fund highlight: Long regarded for its low-cost index funds

Other options

You may also want to consider accounts from TD Ameritrade, Merrill Edge and T. Rowe Price.

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