Top 5 Brokerage Firms for Mutual Funds Investment

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There are many options to invest in mutual funds nowadays. Investors can choose either a discount broker or mutual fund companies to invest. There are pros and cons with each option. Some of the top brokerages for mutual fund investing are: Vanguard, Fidelity, Scottrade, etc.

Best Mutual Fund Brokerages
Intro

Whether you are investing in your regular brokerage account or retirement account, you may find mutual funds as your investment selection. To invest in these investment funds, regular investors can open a brokerage account or a mutual fund account directly from mutual fund companies.

For brokerage account, you can choose either open an account with a discount broker or a full brokerage. I’ll focus on discount brokers; hence they are accessible to most small investors. Several discount brokerages (such as Zecco Trading, Scottrade, E*trade) offer some great selections of mutual funds with low cost to purchase. You may also find a discount broker that offers no-transaction fee mutual funds.

Another alternative is by opening an account directly with the mutual fund company itself. Some of the well-known mutual funds companies are Fidelity, Vanguard, and T. Rowe Price, etc. Vanguard and Fidelity are the best ranked mutual funds companies in the U.S. These mutual funds companies also offer great selection of their fund family at low cost and no transaction fee. It also provides other crucial fund information such as performance, rating, expense fee, fund research, newsletter, etc.

Top Brokerage Firms

Based on my research and experience, the top brokerage firms for mutual fund investment should provide variety of choice and services such as wide selection of mutual fund family, low transaction fee for buying and selling, offers mutual fund research or newsletter, etc.

The best mutual fund brokerages are:
  1. Vanguard
  2. Fidelity
  3. Charles Schwab
  4. Scottrade
  5. T Rowe Price
1. Vanguard

Vanguard fund is well known among cost-conscious mutual fund investors. It provides vast selection of low cost index funds and well known actively manage mutual funds like Vanguard Wellington, Vanguard Star, etc. Currently, there are 68 Vanguard active funds and 61 Vanguard index funds.

There are 7756 total mutual funds are being offered by Vanguard including load fund, transaction fee fund, and NTF funds. The non-Vanguard funds are offered through FundAccess such as American Century fund, Akre fund, Columbia, Invesco, Matthews Asia, TCW fund, etc.

For transaction fee funds, you will need to pay $35 per trade for Standard accounts, $20 for Voyager and Voyager Select, and $8 for Flagship accounts. For non-transaction fee funds, there is no commission fee to buy or sell.

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Typically, there is $3,000 minimum initial investment for most funds. The subsequent investment is $1,000 or more. For shares held <180 days, investor will be charged with 1% sale charge of the proceeds ($50 minimum and $250 maximum). If you want to trade stocks or ETFs, you will need to open Vanguard Brokerage Services (VBS) account.

Some of the best Vanguard mutual funds are:  Vanguard Windsor II fund, Vanguard Mid Cap Index Fund, Vanguard REIT Index fund, Vanguard International Growth fund, Vanguard Intermediate-Term Tax-Exempt Fund, etc.

Pros:
  • Lowest expense fee for index funds
  • No hassle investing experience
Cons:
  • Website is generic and difficult to navigate
  • High minimum initial investment
  • High commission fee for trading stocks or ETFs

2. Fidelity

Fidelity investment is not only providing mutual funds. It also provides variety of financial services such as stock trading platform, cash management or banking service (CD), investment management, and retirement planning (IRA account).

Over the Fidelity FundsNetwork, investors can get access to over 5,000 mutual funds. Fidelity also provides No Transaction Fee (NTF) funds. For transaction fee mutual fund, you will need to pay for $75 per order. Broker assisted funds purchases can cost 0.75% of the total principal amount with $100 minimum and up to $250 maximum.

Fidelity also offers low cost stock and ETF trading. Investors can pay only $7.95 per trade for online trading (i.e. buy and sell stock or ETF online). It also offers 30 commission-FREE iShares ETFs. Fidelity is rated number 1 best overall online broker by Kiplinger’s personal finance magazine and number 1 discount broker by SmartMoney magazine.

Five of top Fidelity mutual funds are:  Fidelity Contrafund, Fidelity Growth Company Fund, Fidelity Spartan Total Market Index fund, Fidelity High Income fund, Fidelity Puritan fund, etc.

Pros:
  • Low cost and vast selection of NTF mutual funds
  • It offers various financial or banking service such as checking, ATM for free
  • Online website is very easy to navigate
Cons:
  • None

3. Charles Schwab aka Chuck

Charles Schwab is another popular financial service provider with wide selection of investment products. It offers an online stock trading platform, mutual fund, exchange traded fund (ETF), certificate of deposit (CD) or money market, bond, insurance, banking, advisory service, etc. It also has over 300 local offices.

For transaction fee funds, you will need to pay $76 per buy and $0 per sell. This commission fee is available for online trades and automated phone trades. For broker assisted trades, there is an additional service charge of $25. For non-transaction fee funds, there is no commission fee to buy or sell. Investor can find NTF funds from Mutual Fund OneSource Funds. There are currently more than 2100 NTF mutual funds.

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Schwab also offers several types of mutual funds such as no-load funds, index funds, mutual funds managed by Charles Schwab Investment Management, and all-in-one portfolio solutions. Some of the popular Schwab mutual funds are: Schwab S&P 500 Index fund, Schwab Small-Cap Equity fund, Schwab International Index fund, etc.

Goods:
  • Lots of investment options
  • Similar to Fidelity, it also offers banking services such as checking and ATM card.
Bads:
  • Fees can be high

4. Scottrade

Although Scottrade is popular among traders, Scottrade also offers financial service with a comprehensive mutual fund selection and online stock trading platform for its investors.

Scottrade offers more than 2600 no-load and no transaction fee mutual funds. There are more than 14,000 mutual funds available through Scottrade. Some of the no load and NTF funds are: American Beacon, PIMCO, Artisan, American Funds, BBH fund, Baron fund, CGM fund, DWS Investments, Lazard, Nuveen, Wasatch, etc.

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There are three type of trading fees for mutual funds. For no load and no transaction fee (NTF) funds, there is no fee for buying, selling, and exchanging fund. For no load funds (not in NTF program), the transaction fee is $17 per trade. For load funds, the transaction fee is $0 per buy, and $17 per sell or exchange.
For stock trading, Scottrade offers their low cost commissions on three different trading platforms: Scottrade, Scottrade Elite, and Scottrade OptionsFirst. It charges $7 per trade.

Goods:
  • Lots of investment options
  • Rich trading tools and research
Bads:
  • Gear toward active trading investors

5. T Rowe Price

With $555 billion under management, T. Rowe Price is founded in 1937. It has become a force in mutual funds, retirement plans, and institutional investing. T. Rowe Price strong offerings are low risk and low expenses mutual funds.

Over the past five years 75% of T. Rowe's mutual funds have beaten the average return for their category. There are 57 mutual funds that are ranked with 4- and 5- stars ratings by Morningstar. Two of its funds are in Kiplinger 25 best funds. Nine of its funds are listed in Money 70 "Recommended Funds”.

For no load and no transaction fee fund, there is no trading fee. For transaction fee funds, the trading fee is $35 per transaction. For load funds, it is only charged the stated load only.

Some of the popular T Rowe Price mutual funds are:  T Rowe Price Dividend Growth fund, T Rowe Price High Yield fund, T Rowe Price Equity Income fund, T Rowe Price New Era fund, T Rowe Price Small Cap Value fund, etc.

Pros:
  • It has tons of best rated mutual funds
  • Simple and working online website
Cons:
  • High minimum initial investment for non T. Rowe Price mutual funds
  • High trading fee
  • Limited banking services

Other Choices

Other mutual funds providers to consider: Firstrade, TD Ameritrade, Zecco Trading, E*Trade, Merrill Edge by Bank of America, and many more.

If you have other mutual fund brokerages that you like, I would be interested to hear from you.

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