You can buy mutual funds through a brokerage account, a bank, or directly from the fund company itself

The place you buy mutual funds depends on what you already have and what you want to pay. Most people open an account at a brokerage firm — companies like Fidelity, Charles Schwab, E*TRADE, or Vanguard — because brokerages hold thousands of funds from many different companies in one place. You can also buy mutual funds through your bank, though banks typically offer a smaller selection and may charge higher fees. A third option is to buy directly from the fund company — Vanguard, Fidelity, and T. Rowe Price all sell their own funds this way — but you can only access that company's funds, not others.

The choice matters because different places charge different fees, offer different funds, and have different minimum investment amounts. A brokerage account gives you the most choice. A bank is convenient if you already have a relationship there, but you may pay more. Buying direct from a fund company works if you want to stick with one family of funds and want to avoid middleman fees.

Key Takeaways

  • Brokerages like Fidelity, Schwab, and Vanguard let you buy thousands of mutual funds from many companies in a single account.
  • Banks sell mutual funds but usually offer fewer choices and may charge higher fees than brokerages.
  • You can buy directly from a fund company's website, but you can only buy that company's funds.
  • Minimum investment amounts vary by place and by fund — some start at $500, others at $3,000 or more, and some have no minimum.
  • Fees differ significantly: some brokerages charge nothing to buy certain funds, while others charge per transaction or take a percentage of your account.

Opening an account at a brokerage

A brokerage is a company licensed to buy and sell investments on your behalf. The big national brokerages — Fidelity, Charles Schwab, E*TRADE, TD Ameritrade, Vanguard, and Merrill Edge — all let you open an account online in 10 to 15 minutes. You will need your Social Security number, a government ID, your address, and a way to fund the account (a bank account or debit card).

Once your account is open, you can search for mutual funds by name, ticker symbol, or category. You choose how much to invest and place an order. The transaction usually settles within one to two business days, meaning the funds appear in your account and you own them. Most brokerages do not charge a fee to buy mutual funds anymore, though some funds themselves have internal costs (called expense ratios) that you pay whether you buy them at a brokerage or anywhere else.

Brokerages also offer different account types. A regular taxable brokerage account has no contribution limits and no tax advantages — you pay taxes on gains and dividends each year. An IRA (Individual Retirement Account) lets you invest up to $7,000 per year (as of 2024, though this amount can change) and defer taxes until retirement. A 401(k) is usually offered through your employer. Each account type has different rules about when you can withdraw money and how taxes work.

Buying mutual funds through your bank

Most banks offer mutual funds through their investment or wealth management division. You can walk into a branch, call, or go online to open an investment account. The process is similar to opening a brokerage account — you provide identification and funding information — but the fund selection is usually much smaller. A bank might offer 200 to 500 mutual funds, while a major brokerage offers 10,000 or more.

Banks often charge transaction fees to buy mutual funds — typically $25 to $50 per purchase — or they may charge an annual account fee. Some banks waive these fees if you maintain a high balance in your checking or savings account with them. If you already have a strong relationship with your bank and keep a lot of money there, the convenience might outweigh the cost. If you are just starting out or want the lowest fees, a brokerage is usually the better choice.

Buying directly from a fund company

Large fund companies like Vanguard, Fidelity, T. Rowe Price, and American Funds let you open an account directly on their website and buy their own funds without going through a brokerage or bank. This can save you money if you plan to invest only in that company's funds, because you avoid any middleman fees.

The downside is selection: you can only buy that company's funds. If you want to own funds from Vanguard and T. Rowe Price in the same account, you would need to open accounts at both companies. For most people, especially those starting out, a brokerage account is simpler because it gives you access to funds from all companies in one place. Direct purchase makes sense if you have decided on one fund family and want to keep things simple.

Understanding minimum investment amounts

Most mutual funds have a minimum initial investment — the smallest amount you must put in to open an account. This varies widely. Some funds have no minimum at all. Others require $500, $1,000, $2,500, or even $10,000 to start. A few funds aimed at wealthy investors have minimums of $50,000 or more.

Brokerages often have their own minimums separate from the fund's minimum. Some brokerages have no account minimum at all, while others require $500 or $1,000 to open. Once your account is open, you can usually buy additional shares of a fund in smaller amounts — sometimes as little as $1 — though some funds set a minimum for additional purchases too.

If you are starting with a small amount of money, look for a brokerage with no account minimum and then search for funds with low or no minimums. Target-date funds and index funds often have lower minimums than actively managed funds.

Comparing fees across different places

Fees are the biggest difference between where you buy. Some brokerages charge nothing to buy most mutual funds. Others charge per transaction — $5 to $50 per purchase. Banks often charge transaction fees. Fund companies selling direct usually charge nothing to buy their own funds.

Beyond transaction fees, every mutual fund has an internal cost called an expense ratio — a percentage of your investment that goes to pay the fund manager, administrative costs, and other expenses. This is the same no matter where you buy the fund. A fund with a 0.5% expense ratio costs you $50 per year for every $10,000 invested. A fund with a 1.5% expense ratio costs $150 per year on the same $10,000. Over decades, this difference compounds significantly.

Some brokerages also offer commission-free funds — mutual funds they have negotiated with fund companies to sell without charging you a transaction fee. Fidelity, Schwab, and Vanguard all have large lists of commission-free funds. If you are comparing places to buy, ask about transaction fees, account minimums, and which funds are commission-free.

Tax-advantaged accounts and where to open them

If you are saving for retirement, you will want to use a tax-advantaged account like an IRA or 401(k). You can open an IRA at any brokerage, bank, or fund company. A 401(k) is offered through your employer — you do not choose where to open it, though you may have some choice in which investments go inside it.

For an IRA, the place you open it matters less than the funds you choose inside it. A Roth IRA or Traditional IRA opened at Fidelity works the same way as one opened at Schwab or your bank — the tax rules are identical. What matters is the funds available and the fees charged. Most brokerages offer IRAs with no account minimum and no transaction fees, making them a good choice for retirement investing.

Frequently Asked Questions

Do I need a lot of money to start buying mutual funds?

No. Many brokerages have no account minimum, and many funds have no minimum investment. You can open an account and buy your first fund with as little as $100 to $500. Some funds and brokerages do require higher minimums, so if you have a small amount to start, search for low-minimum options before opening an account.

Can I buy the same mutual fund at different places?

Yes. A mutual fund like the Vanguard Total Stock Market Index Fund can be bought at Fidelity, Schwab, your bank, or directly from Vanguard. The fund itself is the same, but the fees and account features may differ depending on where you buy it. Compare transaction fees and account minimums before deciding.

What is the difference between a mutual fund and a brokerage account?

A mutual fund is an investment — a pool of money managed by a professional that you own shares in. A brokerage account is the container that holds your investments. You open a brokerage account, then buy mutual funds (or stocks, bonds, or other investments) inside that account.

Should I buy mutual funds through my bank or a brokerage?

A brokerage usually offers more funds, lower fees, and no transaction charges. A bank is convenient if you already have a relationship there and keep a high balance. For most people starting out, a brokerage like Fidelity, Schwab, or Vanguard offers better value.

Can I move my mutual funds if I change my mind about where I bought them?

Yes. You can transfer mutual funds from one brokerage to another, though the process takes a few days to a week. You can also sell the funds at one place and buy them again at another, though this may trigger taxes if the account is taxable. Ask your new brokerage about transfer options before you move.