In the past, back in the digital age, investors could only purchase or sell mutual funds via financial experts, including money managers, brokers, and financial advisors. Online investment platforms have made investors common to all of us. Anyone with a computer, tablet, or smartphone can purchase mutual funds. All you need to do is figure out where to purchase the funds, which type of fund you'd like to purchase, and the kind of charges, fees, and costs you may face.

Suppose you are a member of a retirement account, like a 401(k) scheme, self-directed IRA, or self-directed IRA. In that case, the custodian of your account or plan administrator may permit direct trades in mutual funds on its website (though for 401(k)s, they are limited to the specific funds offered by the plan and typically limited to a predetermined amount of trades you are allowed to make each year or every quarter). In this article, we'll assume that you're seeking to purchase a fund by yourself, whether in a regular taxable account or a tax-deferred.

Investment companies

A common option to overlook is to purchase mutual funds through the investment companies that sell and manage these funds. Mutual fund companies span from publicly traded giants like T. Rowe Price to private boutique firms such as American Century or Dodge & Cox. One of the advantages of purchasing directly through mutual fund firms is that there are no commissions on sales or brokerage fees. Most of your investment goes to the fund, which is put to work for you. The biggest drawback: the investment choices you have are restricted to the fund family.

Investment-cum-financial services companies

Suppose you do not wish to be restricted to just one fund family. In that case, a few companies offer the ability to have an account in-house to purchase or sell mutual funds, as well as Exchange-traded Funds (EFTs) provided by other companies. The Vanguard Group and Fidelity Investments are two of the most well-known types that manage mutual funds and have transformed into full-time financial services companies, enhancing their funds with rivals with their products. The problem is that these companies will naturally seek to push their funds, which means additional transaction costs or commissions are possible when you travel "outside your family."

Brokerages

Another option is to create an online account with the brokerage. It is probably the most expensive option. Most of the time, these accounts will charge a commission/transaction fee for every trade and additional charges for account maintenance or setup. But, they offer the most extensive range of mutual funds you can choose from.

It's relatively easy to find a bank account with fairly low costs, particularly in the case of low-cost brokerages. Some of the most sought-after (and cheapest) are solely online businesses, including E*TRADE or Betterment. With low overhead and largely automated processes, their operational expenses are significantly reduced, evident in the cost they charge customers.

However, don't rule brick-and-mortar brokers out. In light of the success of e-brokers, particularly with investors in the 30-something age bracket and older investors, many traditional brokers have created online platforms that they have developed their own. Most often, fees and minimums for accounts are reduced or waived when customers have only online accounts and avoid papers, paper statements, and human advice services. (Of course, the fact that you have a person to talk to could be an attractive feature of the full-service broker.)

The process of setting up the Online Mutual Fund Account

When you've chosen the bank and trading platform you want to use, it is time to create your account. This is something that is, of course, on the internet. Most firms make it simple: log onto the firm's website and click on a link typically. The same information is that required to open any brokerage account: personal details and account type (individual or joint or tax-deductible and so on).

It is also possible to specify whether you would like dividends from funds deposited into your account or reinvest automatically into the fund. You will also need to provide information about your bank account to transfer the money to fund your initial investment, and if you decide to do so, the account will purchase more mutual fund shares every month. Many firms reduce the mandatory amount to open an account when you sign up for one of these automated investment plans. Online applications typically take about 10 to 20 minutes. Making the application and receiving your account funded typically takes one to three days.