How to Buy Mutual Funds with an Online Broker - dummies

How to Buy Mutual Funds with an Online Broker

By Matt Krantz

Just because you are an online investor doesn’t mean you can’t go through a broker. Nearly all online brokers let you buy mutual funds. Buying through a broker is convenient because your mutual fund holdings are listed on your account statements next to your stock investments.

To buy a mutual fund this way, just log on to your account, enter the mutual fund’s stock symbol, and proceed to buy it just as you’d buy a stock. The online broker’s site then gives you the NAV (net asset value) from the previous day. (After the stock market closes, the mutual fund determines the NAV for the day. That NAV, measured after the market closes, determines the price you pay for the shares.)

Some online brokers charge exorbitant commissions for buying and selling mutual funds. The following table shows some sample commissions from a few top online brokers.

Mutual Fund Commissions
Broker Regular Online Commission
Charles Schwab $76
E*TRADE $19.99
Fidelity Brokerage $75
Scotttrade $17
TD AMERITRADE $49.95 for no-load funds, $0 for load funds
TradeKing $9.95 for no-load funds, no commission to buy or sell load
Zecco $10.00

Online brokers often offer a number of transaction-free mutual funds that you can buy and sell for no commission. Just be careful, though, because these online brokers also usually hit you with a short-term redemption fee, even on a transaction-free mutual fund, if you sell the fund too quickly after buying it. These fees are usually around $50.