Mutual funds are a great way to invest in a variety of securities instead of buying individual stocks or bonds. Learn how to pick the best funds for your portfolio.

Frequently Asked Questions

  • How do I invest in a mutual fund?

    Before investing, consider how much money you have to invest and how much risk you are willing to take. Based on that select a fund that aligns with your investment strategy. Once you’ve chosen the fund, you can purchase shares in it through your brokerage account or directly open an account with the fund company. You can also invest in mutual funds through your IRA or 401(k) plan. 

  • Which mutual fund should I invest in?

    There are different types of mutual funds and once you narrow the type that fits in with your investment goals, compare different funds in that category using a fund screener. Evaluate funds based on their historical performance and how they have performed compared to their benchmark index. Consider funds with low expenses or no loads. Avoid funds with a high turnover ratio.

  • What is a no load fund?

    A no load fund does not charge sales load. Sales load may be charged upon purchase of fund shares (front-end load) or upon the sale of fund shares (back-end loads). Like commissions, loads are paid to the broker for selling the fund (or advising an investor to buy the fund). You can buy no load funds directly from the fund company or through an advisor. No load funds may still charge other fees.

  • What is a mutual fund expense ratio?

    Expense ratio is one of the fees charged by mutual funds and it captures a mutual fund’s operational costs. This cost is passed on to the investors as the expense ratio is deducted from the fund’s total assets each year. Expense ratio impacts your return on investment as a higher expense ratio means lower returns. You can easily find a fund’s expense ratio on its website.

  • What is a good expense ratio for a mutual fund?

    For most mutual funds, expense ratios tend to range from 0.25% to up to 1.5% but rarely significantly higher than that. Unless you have specific reasons to invest in a particular mutual fund, it’s generally a good idea to stick with lower expense ratios. Actively managed funds have higher expense ratios than passive funds.

  • What is the difference between a mutual fund and an ETF?

    While mutual funds and ETFs both use pooled investor funds, there are very different. ETFs trade on exchanges like stocks and trades occur at the market price. Shares of mutual funds are traded based on their net asset value calculated only once a day. Mutual funds can be actively or passively managed. ETFs are typically passively managed leading to lower expenses compared to mutual funds.

Key Terms

Money spilling from an envelope signifies an investor receiving a dividend payment
The 10 Best Dividend ETFs to Buy Now
10 Best Vanguard Funds to Hold for the Long-Term
10 Best Long-Term Vanguard Funds
A woman in a grocery store reads the label on a jar.
Inflation and How To Invest for It
Financial advisor talking to clients
Equity Fund
Two young women having a discussion in a business
Growth Stock Mutual Funds
Couple with young son seated on couch with laptop and mobile
Guide to Stocks vs. Index Funds and How to Choose What's Right for You
Asian student studying in library
Top Mutual Fund Terms Defined
what to consider when choosing between index funds and ETFs: ETFs have lower expense ratios, but higher trading costs, ETFs provide the opportunity to place stock orders, index funds are mutual funds and ETFs are traded like stocks, there are advantages and risks associated with tracking the trend to purchase an ETF
ETF vs. Index Fund: Which Is Right for You?
Finance section of newspaper folded to mutual funds listings placed under a pen, glasses and a cup of coffee
What You Need to Know If You Want to Invest in Mutual Funds
A woman smiling as she calculates finances
New to Investing? Get Started With These Top Vanguard Funds
Grey haired man working on laptop with paper financial statements in one hand
12b-1 Fees
Stock Market_US Stock Exchange_NYSE
The Biggest Mutual Fund in the World
investor analyzing stocks - EMH
Does the Efficient Markets Hypothesis (EMH) Work in Reality?
An investor tracks the Dow 30 on his phone in a coffee shop..
Index Funds to Buy for Long-Term Investing.
Man looking at stock market graph chart on digital tablet
Learn Which S&P Index Funds Are the Best, and Find Out Why.
Fidelity Investments Building Window
Best Fidelity Funds To Buy
Female senior business woman using laptop at home office
Index
Woman analyzing documents while sitting at home
Risks and Benefits of Money Market Funds
Checking Financial Stock Charts on Smartphone in Busy City Street
How To Invest in Mutual Funds
Business people reviewing financial data on digital tablet
Why Investors Use Low-Cost Index Funds
Businesswoman using smartphone on city bridge outside the business building in central business district.
What Is the Average Mutual Fund Return?
A confident young business woman takes a break from reviewing her returns.
What Is a Good Annual Return for a Mutual Fund?
Businessman using laptop in office
Best Total Stock Market Index Funds
Smiling couple with pug using laptop at home
The 10 Best High-Yield ETFs
A businessman uses a tablet to check his investments.
Dividend Mutual Funds
A man checking his index funds on his smart watch
Compare Index Funds to Actively Managed Funds
Businesswoman explaining strategy on whiteboard
Accredited Investor
a printout of a financial chart
Here Is a List of the Best Bond Funds From Vanguard Investments
Stock traders looking at market data on computer screens.
There Are 4 Types of Mutual Funds
Couple Meeting With Financial Advisor In Office
How Bond Funds Work
A man smiles.
How Much Money Do You Need To Retire?
Man using computer to analyze mutual funds
Mutual Fund Beta
money and time concept
10 Ways to Time the Market With Mutual Funds
Investment club meeting in a board room
Investment Club
Image of a blue hand piling red blocks on a seesaw next to a dollar sign
Top Balanced Funds to Buy for Long-Term Investment
Young couple calculating financial bills at home
The Best Bond Index Funds to Buy From Vanguard and Fidelity
Young couple on couch
Aggressive Growth Mutual Fund
Woman at store making transaction
Economic Deflation
Trader working on floor of the NY Stock Exchange
List of 12 Cheapest Index Funds and Why They're the Best
4 stacks of quarters_yields_12 months
How to Analyze a Mutual Fund's TTM Yield
Senior couple with paperwork using laptop on living room sofa
7 Best Bond Funds to Buy for Almost Any Investor
Young couple discusses bond investments
Zero Coupon Bond Funds
Shot of a young woman using a computer at her desk in a modern office
Risk Tolerance
Stock traders waving arms on floor of stock exchange
What Is the S&P MidCap 400 Index?
Woman with laptop outdoors, working.
Examples, Strategies, and Analysis of Short-Term Investing
Looks like we're going to have a good retirement
Vanguard Admiral Shares
Woman looking at graph on wall
Do You Know the Difference Between TTM Yield and 30-Day SEC Yield?
Woman looks over her investment strategy.
Minimum Variance Portfolio
Businesswomen Corporate Marketing Working Concept
A List of the Top Dividend Funds for All Stages of an Investor's Life
stock market chart on tablet with pen, paper, calculator
These 3 Sectors Are Good Long-Term Bets
Smiling businesswoman using tablet at cafe
Fixed Income Investing
Warren Buffett speaking
Why Wealthy Investors do Not Follow This Warren Buffett Tip
A middle-aged couple discuss problems with their pension fund.
Unfunded Liabilities
Closeup of businesswoman using laptop at office desk. She searching web or browsing information.
These Vanguard Funds Produce High Dividends
couple talking to financial advisor
Tactical Asset Allocation
Stacks of quarters showing dividend returns for each quarter.
Here Are Some of the Best Mutual Funds for Safety and Stability.
dog with man on computer
How to Invest in Dogs of the Dow With Mutual Funds
Financial advisor planning with clients at office
Defensive Sector Funds
international stock market performance on iPad
The Best Mutual Funds for International Investing
Man trading stocks on computer
Using Mutual Funds for Investing in Gold
 
 
 
 

Page Sources