Buying Mutual Funds

Beginning and seasoned mutual fund buyers have several options to throw their hat into the ring of mutual funds. Financial advisors counsel buyers on different ways to buy mutual funds.

No-load mutual fund companies are the easiest and safest way to get into mutual funds. Some advisors to potential investors to stay away from these funds because of perceived problems. Reports indicate there are no major differences between no-load and load mutual funds. Load funds, generally termed front-end load carries a commission fee plus other fees (purchase, exchange and settlement).

The basis for no-load mutual fund companies is that the buyer will not pay any transaction fees. The top no-load mutual fund companies are: Dodge and Cox Funds, Fidelity, Janus, Oakmark, TIAA-CREF, T. Rowe Price and Vanguard.

The advantage of no-load mutual fund companies is that the buyer can contact the company and begin to get started in buying mutual funds. These companies offer to start a money market account and have access to withdrawing funds to personal accounts.

Some no-load mutual fund companies engage in a mutual fund supermarket. The mutual fund supermarket gives the buyer the opportunity to select from different mutual funds. The company manages all the transactions with the funds and the buyer receives one personalized statement about the funds. One drawback to this method is the buyer has to put more fees out of pocket. Two of the largest no-load mutual fund companies that have the mutual fund supermarket are Vanguard and Fidelity.

The Securities and Exchange Commission(SEC) is responsible for overseeing how the mutual fund companies are keep up with government standards.

Mutual funds are divided into open-ended or closed-ended funds. Open-ended funds are open to new buyers and the fund can continue to grow with no limit on the number of buyers. Closed-end funds open with a limited amount of shares. Once the shares are depleted, the fund manager closes the fund. Closed-ended funds are usually on the New York Stock Exchange or the American Stock Exchange.

Sometimes a fund takes off and skyrockets so fund manager has to close the fund but would not be considered a closed-ended fund.