Our comparison table of US mutual fund brokers covers the key account features.
These include, tight pricing, financial security, regulation, range of markets, added value and reviews. If you’re looking to compare US Mutual fund brokers, it makes sense to have all of the facts about this popular route to investment in the USA.
Trading and investing carries a high level or risk and losses can exceed your deposits. Featured brokers appear first.
Here are a few of the best Mutual Fund brokers in the US
- Interactive Brokers – Read IBKR reviews
- TradeStation – Read TradeStation reviews
- TD Ameritrade – Read TD Ameritrade reviews
- E*TRADE – Read E*Trade reviews
- Charles Schwab – Read Charles Schwab reviews
What is a mutual fund?
A mutual fund is a managed portfolio of company equities and other financial instruments, such as bonds. US mutual fund brokers amalgamate a large body of investors and then invest on their behalf into the carefully managed portfolio of stocks. They do this in return for a fee. Every investor will have a slice of the overall mutual fund, which will be proportionate to the overall holdings and number of investors in total. Mutual funds are similar to managed funds in the UK.
When you use US mutual fund brokers to invest, you take a slightly different route to purchasing a single share of a company’s stock or a bond issue. For example, with a mutual fund investment you won’t have voting rights. Instead, your share of that fund will represent a share of multiple investments across a range of securities. Investors will receive their return in the form of dividend distributions (which can be taken as cash or used to purchase more holdings in the fund), capital gains on underlying securities and rising prices of mutual share investments, again at the point of sale.
How to invest in mutual funds?
There are two different ways to invest through US mutual fund brokers. Firstly, you can use a fund supermarket which offers different mutual funds from a range of providers. Secondly, you can buy directly from fund companies such as Fidelity, T. Rowe Price or Vanguard.
Which mutual fund should you choose?
Every investor will have their own preference for risk and reward and their own objectives for investing, for example, to fund a pension in later life. Some investors look for an income in the form of dividends and others will look for capital growth. It is important to look at individual mutual fund performance and have your own strategy for assessing which funds will be best placed to offer value to your portfolio.
Advantages of mutual funds?
The mutual funds offered by US mutual fund brokers offer a number of advantages:
1. Access to expertise: As mutual funds are managed, you don’t need to pick individual investments. Instead, you pay a fee for a professional to invest for you, using their skills and experience.
2. Time: It is far quicker to invest in a mutual fund, than to research and buy individual securities.
3. Diversification: mutual funds spread your risk across a range of holdings.
4. Economies of scale: transaction costs are reduced because of the economies of scale involved in large-scale mutuals.
5. Variety: There is a wide range of mutual funds on offer through US mutual fund brokers, covering all sectors of interest.
Alternatives to mutual funds…
There are a number of alternatives to mutual funds which investors might wish to explore. These include Exchange Traded Funds (ETFs), Unit Investment Trust (UITs), Closed-End Mutual funds and individual security purchases. Each has its own features, advantages and disadvantages which should be carefully explored before considering an investment.