Millions of people buy mutual funds by opting into various schemes as an investment option. How do people go about investing in mutual funds outside of their retirement plans at work?
Average people buy mutual funds in at least three popular ways, each with its advantages and disadvantages. Where to invest depends to a large extent on how ready you are to get involved in this process. Some people want to learn how to invest and others will want to trust someone else to manage their investment.
Let’s look at three popular ways of buying mutual funds, starting with how to invest if you want to trust someone else.
1. Contact an investment professional if you’re going to buy a Elss mutual funds with minimal time and effort on your part. Even if you are usually called and asked by these people, you can call them. Look at financial planners, stockbrokers and insurance companies in the phone book. Some life insurance agents also sell mutual funds. Your local bank or credit union may have a representative who sells mutual funds.
The advantage of this approach is that someone helps you make financial decisions and handles the details, including paperwork. The downside is that you will pay sales charges (loads) and other fees that you might otherwise avoid. Instead of blindly selecting someone, I suggest you ask investors who they are dealing with and how they feel about them. Some investment business professionals are better at their jobs than others.
2. The “supermarket” method is another standard method for purchasing mutual funds. For example, if you open a brokerage account with a significant discount broker, you must have access to hundreds of funds to buy. Go to your computer and find “Discount Broker” to get started. Once you invest money in it, you click to purchase mutual funds.
The benefit here is the full range of funds available from many different fund families. You should be able to buy the fund without a sales fee, but transaction fees will apply, which are often very reasonable. On the other hand, it is a self-serving supermarket. If you recommend how to invest or where to invest your money, the service is limited.
3. The third way is to go with a no-load fund family. Search on your computer for “no-load funds” to find a list of them. Such investor-friendly investment firms have toll-free numbers when opening a mutual fund account that you can call for assistance.
This third method has several benefits of investing in mutual funds. You interact directly with the mutual fund company. There are no intermediaries. Without sales pressure, you can talk to their representatives toll-free and ask questions. They are used to talk to average people who are not rich and do not speak the Wall Street language.
Large no-load fund families offer a wide range of mutual funds with no sales fees and at times, the industry’s lowest annual expenses. It is a low-cost way to buy and hold mutual funds from their no-load accounts. However, these mutual fund firms provide shareholder assistance and services free of external charges.
When you invest with the no-load fund family, you can buy or sell mutual funds over the phone or on your computer without any sales or transaction fees.
Note: The downside here is that you make your own investment decisions. You decide how to invest and how to invest your money in various mutual funds. Also, you may have to fill your forms, such as the application required to open an account.