Much has changed in the markets in the last 18 months, and those changes have altered the world of discount and mutual fund brokers. Some brokers have disappeared or merged. At many brokers, you’ll find higher minimum investments, higher costs, or restrictions on investing.
But not all the news is bad. More funds are available without transaction fees (NTF funds) through these “mutual fund supermarkets.” An abundance of free research is on many web sites. At most sites you can get free condensed fund reports from one or more of the major mutual fund research firms. Most web sites, of course, let you review or manage your accounts quickly and easily at any time of the week.
One of our themes at Retirement Watch is that your investment life will be richer and easier if your finances are simplified. One way to simplify is to move all your investments to a mutual fund broker.
Using a broker for mutual funds has many benefits. You can make transactions faster. There is only one telephone number, one web site, and one monthly statement. You’ll spend less time organizing and figuring out your investments and more time actually managing them.
Most of my recommended funds can be purchased without transaction fees through the major brokers. For those that cannot be, I offer a number of alternative funds to consider.
For years I’ve recommended Charles Schwab & Co. for most investors. It invented the mutual fund supermarket, has the best technology, and has offices around the country for those who want that additional service and back up. Schwab also offers the second highest number of NTF fund families. But you can get lower costs, more total funds and additional benefits at other brokers, so you might want to consider them.
The table lists the key features of the major mutual fund brokers. There are at least 30 brokers that handle at least mutual fund trades. You also can invest in funds to some degree through most major stock brokers and even mutual fund families. But I’ve focused on the major mutual fund discount brokers in the table.
There are a few brokers, in addition to Schwab, that should get your attention.
Vanguard, the mutual fund family, has had a brokerage subsidiary for years. The brokerage started as a favor to mutual fund shareholders who also owned a few stocks. But in the last couple of years, Vanguard significantly upgraded and expanded the brokerage. Though still not advertised to the general public, Vanguard Brokerage now is a real discount brokerage that offers many advantages to its mutual fund shareholders.
Vanguard Brokerage lets account holders invest in a wide number of non-Vanguard mutual funds, including 945 on an NTF basis. Of course, it is the only broker where you can trade Vanguard funds with no transaction fee.
For commission trades, the charge is less than Schwab’s (unless you get the Schwab web site discount) and competitive with most other mutual fund brokers. There are a couple of restrictions that are in line with Vanguard’s low-cost policy. The minimum investment is the highest at $5,000. For NTF funds, you trade without a fee only if the fund is held for more than one year. And its online research offering from Morningstar is rather weak.
Another broker to consider is TD Waterhouse, which formed when a Canadian bank bought both Waterhouse Securities and Jack White & Co. It is a true discount broker, charging lower commissions on funds than the other major brokers and has no minimum purchase amount. Its minimum holding period for NTF funds varies by the fund; TD Waterhouse imposes no minimum holding period of its own. This causes some funds not to participate in the Waterhouse program, because they want to avoid market timers. But the broker still offers over 1,400 NTF funds. Unlike Vanguard, TD Waterhouse does have a few offices around the country, but not nearly as many as Schwab.
Another broker to consider is CSFBdirect. This is an Internet-only broker that charges a flat rate of $35 per trade or $50 for a switch trade from one fund to another. The site has won a number of awards from various financial publications as the best web broker. It has some of the best free fund research available, offering reports from Lipper, Standard & Poor’s, and Value Line.
The lowest fees, which aren’t rock bottom any more, are from Internet-only brokers, especially Datek Online.
You can find a mutual fund broker to fit your needs and goals. Take the time to consider the features most important to you, because what is important to me might not be as important to you. The table below is a starting point.
Mutual Fund Supermarket Roundup
|Min. Inv. |
|Min. NTF |
|American Express Broker.||2,525||258||39.95||2,000||180 days||www.americanexpress.com||800-297-8800|
|Banc of America Inv. Svs.||1,500||1,500||40||0||90 days||www.bankofamerica.com||800-926-1111|
|Charles Schwab & Co.||3,298||1,211||39||2,500||180 days||www.schwab.com||800-435-4000|
|CSFB Direct||1,193||1,471||35||1,000||6 mos.||www.csfbdirect.com||800-825-5723|
|Datek Online||3,257||552||9.99||0||9 days||www.datek.com||800-463-2835|
|Dreyfus Brokerage||669||1,332||20||0||180 days||www.edreyfuscom||800-421-8395|
|E*Trade Securities||1,250||3,800||24.95||2,500||30 days||www.etrade.com||800-786-2575|
|Fidelity Brokerage||1,100||3,622||75||2,500||180 days||www.fidelity.com||800-544-8666|
|Financial Cafe||500||4,000||13.75||2,000||90 days||www.thefinancialcafe.com||877-600-6410|
|Harris InvestorLine||3,800||721||34||1,000||90 days||www.harrisinvestorline.com||800-729-7585|
|Muriel Siebert & Co.||6.572||1,370||35||0||90 days||wwww.siebertnet.com||800-872-0666|
|National Discount Brokers||8,211||2,117||20||0||6 mos.||www.ndb.com||800-888-3999|
|Quick & Reilly||589||1,109||25||0||180 days||www.quickandreilly.com||800-837-7220|
|USAA Brokerage||835||662||40||2,000||90 days||www.usaa.com||800-531-8144|
|Vanguard Brokerage||945||1,700||35||5,000||1 year||www.vanguard.com||800-992-9008|
|Your Discount Broker||1,130||10,670||35||5,000||6 mos.||www.ydb.com||800-800-3215|