How to buy a mutual fund

Before you buy a mutual fund, you will need to do your homework in order to know how much it will cost and where you can purchase your investment. Below is a look at how to go about buying mutual funds.

When you buy a mutual fund, it is wise to seek the advice of a professional broker or a registered investment advisor – RIA. For this, you can hire the services of an advisor working for a full-service or discount brokerage firm. Alternatively, you may visit a mutual fund company, an insurance company or even a bank for advice on how to proceed.
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It is not always necessary to pay for professional advice though. Should you decide to do the investing yourself, you can find many mutual fund companies and discount brokers who offer opportunities for direct investment as well. With the wealth of information online, investors can certainly go direct. It does, however, require you to do some research. Look at the long-term trends of different funds, their fee structure and the types of investments available in the family of funds. Choose carefully since changing to a new family of funds will likely incur sales charges.

You will need to do your homework before making your mutual fund purchase. Be sure to ask as many questions as you need in order to be clear on what you want for your portfolio. Demand full disclosure from your advisors and be prepared to pay for good advice. In order to determine whether or not the fees you pay for consulting your advisor are worth it, find out whether they will charge you simply for completing transactions on your behalf, or if they will offer you some comprehensive financial planning advice as well.

If you do decide to hire the services of an advisor to buy mutual funds on your behalf, you can pay them in several ways. In most instances, you will find that advisors get to dictate the means by which you are required to pay them. This is of course dependent on where they work, be it an RIA, bank or brokerage firm. The common way to effect payment is through a sales charge paid up front for each buy transaction; and a back-end sales charge taken for each sell transaction. There is also the annual fee paid for managing your investment.

Even if you decide not to use an agent and instead go it alone, there are still fees that the mutual fund company will charge you. For this reason, it is important to do your homework on what operating expenses and management fees you will incur while carrying out investments yourself. Since mutual funds are almost always a long-term investment, carefully examine the long-term fee structure.

Once you have taken care of aspects such as where to get good mutual fund advice, doing your homework, receiving full disclosure, you should be able to focus on saving money by building your mutual fund portfolio.

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