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What Are the Best Ways to Invest in Mutual Funds? Most of us have a pretty good idea what mutual funds are about, so maybe the more relevant question is, what are the best ways to invest in mutual funds? There are different ways to own them, different times and methods to invest, and even other assets we might like to hold in addition to mutual funds. Properly used, mutual funds can increase investment returns substantially.
But view them as passive, invest-and-forget vehicles, and they may be no better than owning individual stocks. Keeping all of your mutual funds in a single fund family has the advantage of saving you money on transaction fees. Fund families also typically allow you to switch from one fund to another without charging an exchange fee. There’s usually a limit on the number of times you can do this in any given year so a fund family may not save you much if you’re looking to actively trade funds.
Brokerage firms offer mutual funds and while they charge small commissions for buying and selling of funds, they offer a wider variety of funds than fund families do. This is true because brokerage firms offer the funds of many mutual fund families, which means the investment choices are far greater than if you have all of your holdings with a single fund family. Another advantage they have over fund families is that you can hold other investments, like stocks, bonds and ETFs, in the same account, eliminating the need to maintain multiple investment accounts. If you work with a discount broker and invest only in no-load mutual funds, the cost in transaction fees versus fund families may be insignificant. Dollar cost average, or take the plunge? This question applies with mutual funds just as it does with individual stocks.