It's a fantastic decision to consider investing in mutual funds, and E*TRADE offers a robust platform to help you do just that. Mutual funds are a popular choice for many investors because they offer diversification and professional management, pooling money from many investors to buy a variety of stocks, bonds, or other securities.
Ready to dive in? Let's get started on your journey to buying mutual funds on E*TRADE!
How to Buy Mutual Funds on E*TRADE: A Step-by-Step Guide
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| How To Buy Mutual Funds On Etrade |
Step 1: Are You Ready to Invest? (Account Setup & Funding)
Before you can even think about which mutual fund to buy, you need to ensure you have an active E*TRADE account with funds ready to invest.
1.1 Do You Have an ETRADE Account?*
If not, don't worry! Opening an account with ETRADE is a straightforward process. You'll generally need to open a brokerage account. ETRADE also offers various retirement accounts like Traditional IRAs, Roth IRAs, and Rollover IRAs, all of which can hold mutual funds. If your goal is retirement planning, consider one of these tax-advantaged options.
Online Application: The quickest way is to apply online, which usually takes about 10 minutes. You'll need personal information like your name, address, date of birth, and Social Security number.
By Phone or Mail: E*TRADE also offers options to open an account by phone or by mailing in an application.
1.2 Funding Your ETRADE Account*
Once your account is open, you'll need to deposit money. E*TRADE provides several convenient ways to do this:
Electronic Funds Transfer (EFT): This is often the easiest. You can link your bank account to your E*TRADE account and transfer funds electronically. This typically takes 1-3 business days.
Wire Transfer: For faster access to funds, a wire transfer can be processed on the same business day, though it may involve a fee from your bank.
Mobile Check Deposit: Use the E*TRADE mobile app to deposit a check by simply taking a picture.
Mail a Check: You can also mail a check directly to E*TRADE.
Transfer an Account: If you have an existing brokerage account at another institution, you can initiate a full or partial transfer of assets to E*TRADE. This process can take around 10 business days or more.
Pro Tip: Ensure your funds have settled before attempting to purchase mutual funds. While some transfers might show immediately, they may not be "investable" until the transfer is complete.
QuickTip: Reflect before moving to the next part.
Step 2: Researching and Selecting Mutual Funds
This is where the real investment journey begins! E*TRADE offers a wide selection of mutual funds, including their own "No Fee Index Funds" which have a 0% expense ratio.
2.1 Understanding Mutual Fund Basics
Before you start Browse, it's essential to understand a few key terms:
Net Asset Value (NAV): Mutual funds are priced once per day after the market closes. This price is the NAV. Your order will be executed at the next available NAV.
Expense Ratio: This is the annual fee charged by the mutual fund to cover its operating expenses, expressed as a percentage of your investment. A lower expense ratio is generally better, as it means more of your money is working for you. ETRADE offers many no-transaction-fee (NTF) mutual funds, meaning you won't pay a separate commission to ETRADE for buying or selling them.
Load Funds vs. No-Load Funds:
Load Funds: Charge a sales charge or commission when you buy (front-end load), sell (back-end load or deferred sales charge), or both.
No-Load Funds: Do not charge sales commissions. E*TRADE provides access to a vast number of no-load, no-transaction-fee mutual funds.
Prospectus: Always read the fund's prospectus before investing. It contains critical information about the fund's objectives, risks, fees, and investment strategies. You can typically find the prospectus on E*TRADE's mutual fund research pages.
2.2 Utilizing ETRADE's Mutual Fund Screener*
E*TRADE provides powerful tools to help you narrow down your choices:
Log In: Access your E*TRADE account.
Navigate to Research: Look for a "Research" or "Investment Choices" section, then select "Mutual Funds."
Use the Screener: E*TRADE's mutual fund screener allows you to filter funds based on various criteria, such as:
Fund Family: (e.g., Vanguard, Fidelity, E*TRADE No Fee Funds)
Fund Category/Type: (e.g., Large-Cap Equity, International, Bond, Balanced, Sector-Specific)
Performance: (e.g., 1-year, 3-year, 5-year returns)
Expense Ratio: To find low-cost options.
Minimum Investment: To ensure it fits your budget.
No-Load/No-Transaction-Fee Funds: To avoid additional charges.
Risk Tolerance: Some screeners allow you to filter based on risk profiles.
2.3 Analyzing Fund Information
Once you've identified a few potential funds, click on them to view detailed information, including:
Performance charts and historical returns.
The fund's holdings (what it invests in).
Management team details.
Key statistics like expense ratio, turnover ratio, and fund size (Assets Under Management - AUM).
Links to the fund's prospectus and Statement of Additional Information (SAI).
Remember: Past performance is not indicative of future results. Focus on a fund's investment objective, consistency, and how well it aligns with your own financial goals and risk tolerance.
Step 3: Placing Your Mutual Fund Order
Tip: Don’t just scroll to the end — the middle counts too.
Once you've chosen the mutual fund(s) you want to invest in, it's time to place your order.
3.1 Initiating the Trade
From Research Page: Often, there will be a "Buy" button directly on the fund's research page.
Through the Trading Tab: Alternatively, navigate to the "Trade" section on E*TRADE and select "Mutual Funds."
3.2 Entering Order Details
You'll typically need to provide the following information:
Account: Select the E*TRADE account from which you want to make the purchase.
Action: Choose "Buy."
Mutual Fund Symbol (Ticker): Enter the ticker symbol of the mutual fund you've chosen.
Order Type: For mutual funds, orders are almost always "Dollar Amount" or "Share Amount."
Dollar Amount: This is common for mutual funds. You specify the dollar amount you wish to invest (e.g., $1,000). The system will then purchase as many shares as that dollar amount allows, based on the next calculated NAV.
Share Amount: Less common for initial mutual fund purchases, but useful if you want to buy a specific number of shares.
Confirmation: Review all the details of your order carefully. This is your last chance to catch any errors. You'll likely see a summary of the trade, including estimated costs and disclaimers.
3.3 Understanding Execution and Settlement
Execution: Unlike stocks or ETFs that trade throughout the day, mutual fund orders are typically executed once a day after the market closes (usually around 4:00 PM ET). This means if you place an order during market hours, it will be executed at that day's closing NAV. If you place it after the market closes, it will be executed at the next business day's closing NAV.
Settlement: Mutual fund transactions usually settle one (1) business day after the trade date. This means the actual transfer of funds and shares is finalized.
Step 4: Monitoring Your Investment
Your investment journey doesn't end after you buy the mutual fund. Regular monitoring is key.
4.1 Accessing Your Portfolio
Log in to your E*TRADE account and go to your "Portfolio" or "Accounts" section.
You'll see your mutual fund holdings, their current value, and performance.
Reminder: Take a short break if the post feels long.
4.2 Reviewing Performance
Keep an eye on the fund's performance relative to its benchmark and your expectations.
Remember that market fluctuations are normal. Avoid making impulsive decisions based on short-term movements.
4.3 Rebalancing (Optional but Recommended)
Over time, your mutual fund investments might grow at different rates, leading to a shift in your desired asset allocation. Periodically rebalancing your portfolio by selling some holdings that have performed well and buying more of those that have lagged can help maintain your desired risk level and investment strategy.
10 Related FAQ Questions (How to...)
Here are some common questions about buying mutual funds on E*TRADE, with quick answers:
How to choose the right mutual fund on E*TRADE?
Focus on your financial goals and risk tolerance. Use E*TRADE's screeners to filter by fund type (equity, bond, balanced), expense ratio, and historical performance. Always read the prospectus.
How to find no-transaction-fee (NTF) mutual funds on E*TRADE?
When using the mutual fund screener, look for a filter option for "No Transaction Fee" or "NTF funds." E*TRADE highlights these funds to help you avoid extra charges.
How to understand the fees associated with mutual funds on E*TRADE?
E*TRADE generally charges $0 commission for online mutual fund trades. However, mutual funds themselves have expense ratios (annual management fees) and some may have loads (sales charges). Check the fund's prospectus for a complete breakdown of all fees.
Tip: Don’t just scroll — pause and absorb.
How to set up recurring investments in mutual funds on E*TRADE?
E*TRADE typically allows you to set up automatic investments into mutual funds, often referred to as "recurring investments" or "dollar-cost averaging." Look for this option within your account settings or on the mutual fund's trading page after your initial purchase.
How to sell a mutual fund on E*TRADE?
Navigate to your portfolio, select the mutual fund you wish to sell, and choose the "Sell" option. You can usually specify a dollar amount or number of shares to sell. Keep in mind that mutual fund orders execute at the next calculated NAV after market close.
How to check the status of my mutual fund order on E*TRADE?
After placing an order, you can usually find its status in the "Order Status" or "Activity" section of your E*TRADE account.
How to access a mutual fund's prospectus on E*TRADE?
When researching a mutual fund on E*TRADE, there will typically be a prominent link to the fund's prospectus on its dedicated information page.
How to get help with mutual fund investing on E*TRADE?
E*TRADE offers customer service via phone, chat, and email. They also have extensive educational resources in their "Knowledge" or "Investing Basics" sections.
How to diversify my portfolio with mutual funds on E*TRADE?
Utilize E*TRADE's research tools to select mutual funds that invest in different asset classes (stocks, bonds), geographies (domestic, international), and market capitalizations (large-cap, small-cap). Consider diversified "balanced funds" or "target-date funds" if you prefer a more hands-off approach.
How to know if a mutual fund is suitable for my IRA on E*TRADE?
Most mutual funds are eligible for IRA accounts. The suitability depends on your individual retirement goals, time horizon, and risk tolerance. Ensure the fund's objectives align with your long-term retirement strategy and consider the tax implications of mutual fund distributions within an IRA.
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