Mutual Fund Companies

A mutual fund is a basket of stocks or bonds that cover a wide range of stock market indexes and sectors. The principal advantage of mutual funds is their diversification. For example, instead of investing directly in Cisco, and riding the ups and downs of Cisco, one would invest in a bundled package of technology stocks. Or if investing directly in Wells Fargo is not yielding what you expected, a mutual fund that groups together banking stocks could be a more attractive offer.

Mutual funds were initially introduced to the U.S. in the 1890s. Yet, post the 1929 Wall Street crash Congress put some serious restrictions on mutual fund investment. The stock market overall remained stagnant for a couple generations until confidence returned in the 1950s, and by 1970 there was roughly $48 billion in assets distributed over 360 funds.

As of today, a whopping $40.4 trillion is invested in mutual funds, with the U.S. far outpacing the pack at $18.9 trillion. Luxembourg rounds out number 2 with $3.9 trillion, followed by Ireland at $2.2 trillion and Germany with $1.9 trillion. In the U.S. especially mutual funds play a very important role in the everyday finances of most American homes. For example, by the end of 2016 a little over 20% of American households held mutual funds. Retirement plans like the ever popular 401(k) are commonplace and mutual funds are the largest holders of stocks and bonds.

When choosing a mutual fund company, the first thing to consider are the fees. They will be elevated compared to simply owning shares of a company and income is also less predictable over time. However, as we touched on before, increased diversification is the principal advantage of a mutual fund, plus, established, mutual fund companies offer professional investment management as well as service and convenience with fund services such as check writing. Government oversight is common and the transparency and ease of use of a mutual fund is a certain value-added.

One of the bigger players in the mutual fund game is Vanguard. With per trade fees of just $7, there is no account minimum with Vanguard and their mutual fund selection is one of the largest. Vanguard’s customer support continues to receive rave reviews, but the platform does get knocked for limited research and data functionality.  

Another excellent option is Fidelity Brokerage. Originally known for its retirement accounts, Fidelity also has very low trade commissions, in fact even lower than Vanguard at just $4.95 per trade. Their fund selection isn’t as extensive as Vanguard, but customer service is one of the best reviewed areas as well.

Lastly is a giant in the field, Charles Schwab. Tying Fidelity at a $4.95 per trade figure, these guys have a strong reputation alongside two robust trading platforms. The pros of Schwab – above-average mobile app, extensive research, and like the others, great customer support. See a pattern here with customer support? We do, the big boys do it well and that’s what sets them apart. A couple cons with Schwab – higher trade commissions, but not nearly as high compared to the industry average.

There are no barriers to entry here, folks. Jump in, a mutual fund just for you is waiting around the corner.