You buy mutual funds through a brokerage account, not directly from the fund company
To own a mutual fund, you open an account with a brokerage firm — a company licensed to buy and sell securities on your behalf. You then deposit money into that account and use it to purchase shares of the fund you want. The brokerage holds the shares in your account and handles the paperwork. You do not contact the mutual fund company directly; the brokerage is your intermediary.
The process takes about five to ten minutes to start, though the account may take one to three business days to fully set up. You will need a Social Security number, a valid ID, and a way to fund the account — either a bank transfer, a check, or a wire transfer. Some brokerages let you start with as little as $1; others set minimums of $500 or $1,000 or more.
Key Takeaways
- You must open a brokerage account before you can buy a mutual fund; the fund company itself does not sell directly to individual investors in most cases.
- The account setup takes minutes online, but the brokerage needs your Social Security number, ID, and proof of address before funds can be transferred.
- Once your account is open and funded, you search for the fund by name or ticker symbol and place a buy order just as you would for a stock.
- Mutual funds trade once per day at the closing price, so your order placed during the day executes at that day's end price, not when ready.
- Different account types — taxable brokerage, IRA, 401(k) — have different tax treatment and withdrawal rules, so choose based on your situation.
Choose the type of account that matches your goal
Before you open an account, decide whether you are saving for retirement or for a shorter-term goal. A taxable brokerage account has no contribution limits and no withdrawal restrictions — you can take money out whenever you want, but you owe taxes on any gains when you sell. This works for goals five to ten years away or sooner.
A traditional IRA or Roth IRA is for retirement savings. Contributions may be tax-deductible (traditional) or tax-free on withdrawal (Roth), but you cannot withdraw the money before age 59½ without a penalty in most cases. A 401(k) through your employer works the same way but may include an employer match — information programs if your employer offers it. If your employer offers a 401(k) match, that is usually the best place to start because you are getting an when ready return on your money.
If you are not sure which account type fits your situation, the account setup process will ask you questions about your age and when you plan to use the money. The brokerage will suggest an account type based on your answers.
Open an account with a brokerage firm
Search online for "brokerage account" or "mutual fund broker" and you will find dozens of options: Fidelity, Vanguard, Charles Schwab, E*TRADE, Merrill Edge, and others. Each one has a website with an "Open an Account" button. Click it and you will be asked for your name, address, Social Security number, date of birth, and employment information.
You will also choose a username and password, and the brokerage will ask how you plan to fund the account. Most brokerages let you link a bank account so money transfers electronically. Some accept checks mailed in. A few charge a fee for wire transfers; most do not. The brokerage will verify your identity — this usually happens when ready, but sometimes takes a few hours.
Once your identity is verified, you can log in and see your account. The money you transferred may not be available to invest when ready; most brokerages hold it for one to three business days while the transfer clears. You can watch the balance update in real time as the transfer processes.
Find the specific mutual fund you want to buy
Once your account is funded, log in to your brokerage and look for a search box or a "Buy" button. Enter the fund's name or its ticker symbol — a short code like VTSAX (Vanguard Total Stock Market Index Fund) or FSKAX (Fidelity Total Stock Market Index Fund). The brokerage will show you the fund's current price, its performance history, and its expense ratio (the annual fee the fund charges).
Read the fund's description to confirm it matches what you are looking for. Some funds focus on U.S. stocks, others on international stocks, bonds, or a mix. The brokerage will also show you the fund's prospectus — a legal document that explains the fund's strategy, risks, and fees in detail. You do not need to read the entire prospectus, but skimming the first few pages tells you what the fund actually does.
If you cannot find the fund you want, it may not be available through that brokerage. Some brokerages restrict which funds they offer, especially if they are owned by a fund company (Vanguard's brokerage emphasizes Vanguard funds, for example). If the fund you want is not available, you can either choose a different fund or open an account with a different brokerage.
Place your buy order and confirm the transaction
Once you have found the fund, click "Buy" or "Invest" and enter the dollar amount you want to invest or the number of shares you want to purchase. Most people enter a dollar amount — for example, $5,000 — and the brokerage calculates how many shares that buys at the current price. Enter your amount and review the order before you submit it.
When you submit the order, the brokerage will show you a confirmation number and a summary of what you bought. Save this confirmation or take a screenshot. The order is not final yet — mutual funds trade once per day, at the market close (usually 4 p.m. Eastern time). If you place your order before the market closes, it executes at that day's closing price. If you place it after the market closes, it executes at the next day's closing price.
Within one business day, your account will show the shares you own and their current value. You can now hold the fund, buy more, or sell it whenever you want (though selling in a taxable account may trigger a tax bill if the fund has gained value).
Understand the costs and fees you will pay
When you buy a mutual fund, you pay two kinds of costs: the brokerage's fee (if any) and the fund's annual expense ratio. Most major brokerages charge zero commission to buy or sell mutual funds, so there is no upfront fee. However, some smaller or older brokerages still charge a commission per transaction — usually $5 to $50 per trade. Check the brokerage's fee schedule before you open an account if cost matters to you.
The fund itself charges an expense ratio, which is a percentage of your investment deducted each year to cover the fund's operating costs. A fund with a 0.03% expense ratio costs $3 per year on a $10,000 investment. A fund with a 1% expense ratio costs $100 per year on the same investment. The expense ratio is deducted automatically; you do not pay it separately. Over decades, a difference of even 0.5% in expense ratio can add up to tens of thousands of dollars in lost growth, so comparing expense ratios matters if you are choosing between similar funds.
If you buy a mutual fund in a taxable brokerage account, you may also owe capital gains tax when you sell the fund at a profit. If you buy in an IRA or 401(k), you do not owe tax on gains until you withdraw the money in retirement (or never, in the case of a Roth IRA). This is one reason retirement accounts are often better for long-term investing.
Set up automatic investments if you want to buy regularly
Most brokerages let you set up automatic monthly or weekly investments in a mutual fund. You choose an amount — for example, $500 per month — and the brokerage deducts it from your linked bank account and buys the fund on a schedule you set. This is called dollar-cost averaging, and it removes the guesswork of trying to time the market. You invest the same amount regardless of whether the fund's price is high or low that month.
To set up automatic investments, log into your account and look for "Automatic Investment," "Recurring Investment," or "Dividend Reinvestment." The brokerage will ask you which fund, how much, and how often. Once it is set up, the investments happen without you having to do anything. You can change or stop the automatic investment at any time.
Monitor your investment and rebalance if needed
After you buy a mutual fund, you do not need to do anything. The fund manager buys and sells stocks or bonds inside the fund, and you own a share of whatever is in it. You can check your account balance whenever you want, but daily price changes are normal and do not require action.
If you own multiple funds or a mix of funds and individual stocks, you may want to rebalance once a year — selling some of what has grown the most and buying more of what has grown the least, to keep your portfolio aligned with your original plan. Most brokerages have a tool that shows you your current allocation (what percentage is in stocks, bonds, etc.) and suggests rebalancing. You can do this yourself or set it up to happen automatically.
If you are investing for retirement and your brokerage offers target-date funds — funds that automatically shift from stocks to bonds as you get closer to retirement — you can buy one of those instead and let it rebalance itself. This removes the need to think about it.
Frequently Asked Questions
Can I buy a mutual fund directly from the fund company without a brokerage?
Some fund companies, including Vanguard and Fidelity, let you buy their own funds directly through their websites without opening a separate brokerage account. However, you still need to open an account with them — it is just called a "fund account" instead of a "brokerage account." If you want to buy funds from multiple companies, a brokerage account is simpler because you can hold everything in one place.
What is the minimum amount I need to invest to buy a mutual fund?
It varies by brokerage and fund. Some brokerages let you start with $1 or $100. Others require $500 or $1,000 minimum. Some mutual funds themselves have minimums of $1,000 or $3,000 for the first purchase, though the minimum is often waived if you set up automatic monthly investments. Check the brokerage and fund's requirements before you open an account.
Do I have to buy whole shares, or can I buy a fraction of a share?
Most brokerages now let you buy fractional shares, so you can invest any dollar amount you want and own a partial share if needed. For example, if a fund costs $150 per share and you want to invest $100, you own 0.67 shares. This makes it easier to start investing with small amounts.
When does my mutual fund order execute if I place it after the market closes?
Mutual funds trade once per day at the market close, around 4 p.m. Eastern time. If you place an order after the market closes, it executes at the next day's closing price. You will not know the exact price until after the market closes that day. This is different from stocks, which trade throughout the day at changing prices.
Can I sell my mutual fund whenever I want, or are there restrictions?
In a taxable brokerage account, you can sell whenever you want with no penalty. In a retirement account like an IRA or 401(k), you can sell the fund itself anytime, but withdrawing the money before age 59½ usually triggers a 10% penalty plus income tax on the amount withdrawn. You can move money between different funds inside the same retirement account without penalty, but taking it out is restricted.