Top Investment Brokers For Mutual Fund Investing

by Silicon Valley Blogger on 2010-02-264

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

If you own mutual funds, it’s 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, you’ll be able to compare mutual funds, fund companies and online stock brokers and make the right decisions for your investment money. So let’s 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, you’ll need to check the prospectus of any fund you are considering.

Top Investment Brokers For Mutual Fund Investing

Discount Brokerage
Mutual Fund Fees per Transaction
TradeKing $4.95 per ETF trade; $14.95 per No Load trade; $0 for Load Funds but there may be specific fund charges
Zecco $4.50 per ETF trade; $10 per mutual fund trade
Scottrade $7 per ETF trade; $0 for No Load/No Transaction Funds (NTF); $17 per trade for No Load Funds (not in NTF program); $0 to Buy, $17 to Sell / Exchange for Load Funds
OptionsHouse $3.95 per ETF trade; $9.95 per mutual fund trade (Load Funds may have additional fees)
optionsXpress $9.95 to $14.95 per ETF trade; $14.95 per mutual fund trade (plus additional loads or fees, if any)
E*Trade $7.99 to $9.99 per ETF trade; $0 for No Load/No Transaction Funds (NTF); $19.99 per trade for Transaction Fee Funds; check prospectus for Load Funds
TradeMonster $7.50 per ETF trade; $15 per mutual fund purchase, $0 per mutual fund sale
ShareBuilder $4 per trade for ETFs, with other various pricing programs; $0 for NTF funds; $19.95 per mutual fund trade for other funds
Charles Schwab $5 to $13.95 per ETF trade; $0 for Schwab OneSource Funds; $49.95 per trade for Transaction Fee Funds


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 fund’s management and other fees pay the broker through which the funds are being offered. You’ll want to check your prospectus carefully and study the costs associated with a new fund before you open an account.

Case Study: Scottrade’s Mutual Fund Commissions

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

  • Find out if the fund is a Load Fund or a No Load Fund. You’ll 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 fund’s prospectus.
  • Find out if the Fund belongs to the broker’s 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 broker’s NTF program depending on their arrangement with the broker. If you buy into an NTF fund, you typically don’t pay a brokerage commission.
  • For management fees and expense ratios, you’ll need to check the fund’s 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, you’ll 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.

Copyright © 2010 The Digerati Life. All Rights Reserved.

{ 4 comments… read them below or add one }

John Rowe February 28, 2010 at 6:59 am

I don’t know why people still buy load funds. Those things should become extinct! No load funds are the way to go. As it is, you’re hit with fees no matter where you go, might as well do what you can to minimize them.

KT February 28, 2010 at 1:07 pm

Wellsfargo is not mentioned ?

If you have more than 25000 in assets & trade minimally during the year ( buy & hold longterm ), Wellsfargo is a good place.

They offer 100 free trades a year ( starts from the day you open the account & not the calendar year ) & the free trades include mutual funds that normally cost $10-$50 at other brokerages.

You will need to open a PMA checking account in addition to the brokerage account.
The PMA account has a monthly fee which is waived if you have more than 25000 in assets with wellsfargo ( including the brokerage assets , checking assets & so on).

BOA offers a similar but much inferior program where the offer is 360 free trades a year but they require you to keep the 25000 in deposit accounts with them ( which have very low interest rates & also removes 25000 from the investing action )

The Wellsfargo brokerage website is not jazzy & looks very 1995 ish , but it lets you buy & sell stocks & mutual funds :)

More info at https://www.wellsfargo.com/jump/investments/freetradesonline

Silicon Valley Blogger February 28, 2010 at 1:57 pm

Many brokers are offering free trades these days. I know that optionsXpress does, so does ETrade and Zecco. WellsFargo is okay if you have a lot of assets to start with — I like that you don’t have to trade a lot to be able to qualify for the free trades, although this same benefit is also extended by other brokers anyway. Personally, a bank isn’t where I go for my investment needs, but that’s just me.

Yes, you are not limited to brokers or mutual funds. Some banks also have brokerage departments that can handle your assets.

Arthur March 12, 2010 at 2:58 am

@John Rowe I’m with you. I guess we have enough beginners so load funds still exist. I don’t see it being extinct anytime soon, though. So just focus on picking the no load ones. Better yet, get the no-load, no fee funds.

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