How to Start Investing in a Mutual Fund
You need a brokerage account, money to invest, and a choice of fund
Starting a mutual fund investment means opening an account at a brokerage firm, depositing money, and buying shares of the fund you want. The process takes a few days to a week from start to finish. You do not need a large amount to begin — many funds accept initial investments of $500 to $3,000, though some have no minimum at all.
The real work happens before you open the account: deciding which fund fits your goals, how much risk you can handle, and whether you want an actively managed fund (where a manager picks the holdings) or an index fund (which tracks a market benchmark). Once you have made that choice, the mechanics are straightforward.
Key Takeaways
- You open a mutual fund account through a brokerage firm like Fidelity, Vanguard, Charles Schwab, or your bank, not directly from the fund company itself.
- Most brokerages let you open an account online in 15 to 30 minutes and fund it by linking a bank account or mailing a check.
- You will choose between a taxable brokerage account, a traditional IRA, or a Roth IRA depending on whether you want tax breaks now or in retirement.
- Once your account is funded, you search for the fund by name or ticker symbol and place a buy order just like you would for a stock.
- The fund shares settle in your account within one to three business days, and you own them until you decide to sell.
Choose a brokerage firm to hold your account
A brokerage firm is the company that holds your money and lets you buy and sell mutual funds. You do not buy directly from the mutual fund company. Instead, you open an account at a brokerage, and that brokerage gives you access to thousands of mutual funds from many different fund companies.
The largest brokerages that cater to individual investors are Fidelity, Vanguard, Charles Schwab, E*TRADE, and TD Ameritrade. Most banks also let you open a brokerage account. All of them offer mutual funds with no trading fees, though the selection and quality of research tools vary. If you already have a bank account or retirement account somewhere, starting there can be simpler because you already know the interface and customer service.
Compare brokerages on three things: whether they carry the specific fund you want to buy, whether they charge a fee to buy it (most do not anymore, but some older or less common funds still carry a charge), and whether their website or app makes sense to you. You do not need to pick the "best" brokerage — any major one will work, and you can always move your money later if you change your mind.
Decide what type of account to open
Before you open an account, you need to choose whether it will be a regular taxable account, a traditional IRA, or a Roth IRA. This choice affects how much you can invest each year and when you pay taxes on your gains.
A taxable brokerage account has no limits on how much you can invest and no restrictions on when you can withdraw the money. You pay taxes on dividends and capital gains each year. This is the right choice if you are saving for something in the next few years, or if you have already maxed out your retirement account contributions.
A traditional IRA lets you deduct your contributions from your taxes in the year you make them (if you meet income limits), and you do not pay taxes on gains until you withdraw the money in retirement. You can contribute up to $7,000 per year (or $8,000 if you are 50 or older), and you cannot withdraw without penalty until age 59½. This is the right choice if you want a tax break now and are saving for retirement.
A Roth IRA does not give you a tax deduction now, but your gains grow tax-free and you can withdraw them tax-free in retirement. You can also withdraw your contributions (not the gains) at any time without penalty. You can contribute up to $7,000 per year (or $8,000 if you are 50 or older), but there are income limits — if you earn above a certain threshold, you cannot contribute directly. This is the right choice if you expect to be in a higher tax bracket in retirement, or if you want maximum flexibility.
Open the account online or by mail
Most brokerages let you open an account entirely online. You will need your Social Security number, date of birth, address, and employment information. The process takes 15 to 30 minutes. Some brokerages ask a few questions about your investment experience and goals, but these are informational — they do not prevent you from opening the account or buying any fund you choose.
After you submit your application, the brokerage reviews it (usually within a few hours to one business day) and sends you a confirmation email with your account number and login details. At that point, your account exists but is empty.
If you prefer not to apply online, you can request a paper application by phone or mail. The process takes longer — usually one to two weeks — but the end result is the same.
Fund your account by bank transfer or check
Once your account is open, you need to deposit money. Most brokerages let you link a bank account and transfer money electronically. This is the fastest method: you authorize the transfer online, and the money arrives in your brokerage account within one to three business days.
If you do not want to link a bank account, you can mail a check to the brokerage. Write your account number on the check and mail it to the address the brokerage provides. This method takes longer — usually five to ten business days — because the check has to arrive, be processed, and clear.
Some brokerages also accept wire transfers, which are faster than checks but may carry a small fee. Ask your brokerage which methods are available and which are free.
Search for the fund and place a buy order
Once your account is funded, log in to your brokerage account and look for the "buy" or "trade" section. You will search for the mutual fund by its name or ticker symbol — a short code like VTSAX (Vanguard Total Stock Market Index Fund) or FSKAX (Fidelity Total Stock Market Index Fund).
When you find the fund, you will see its current price per share and a form to enter how many shares you want to buy or how much money you want to invest. If you enter a dollar amount (for example, $5,000), the brokerage will calculate how many shares that buys at the current price. Most mutual funds allow fractional shares, so you do not have to buy a whole number.
Enter the amount you want to invest and review the order. Most brokerages show you a summary of what you are about to buy, the price per share, and the total cost. Once you confirm, the order is placed. Mutual fund orders placed before the market closes (usually 4 p.m. Eastern time) execute at that day's closing price. Orders placed after the market closes execute at the next day's closing price.
Wait for the shares to settle in your account
After you place a buy order, the shares do not appear in your account immediately. Mutual fund trades settle within one to three business days, meaning the brokerage transfers the shares to your account and deducts the money from your cash balance. Until settlement is complete, your order shows as "pending" in your account.
Once settled, the shares are yours. You own them until you decide to sell. You can check your account balance and the current value of your shares at any time by logging into your brokerage account. Most brokerages send you a monthly or quarterly statement showing all your holdings and their value.
Frequently Asked Questions
Do I have to buy a whole share of a mutual fund?
No. Most brokerages now allow fractional shares, so you can invest any dollar amount and own a portion of a share. This makes it easier to invest smaller amounts or to put an exact dollar figure into a fund without having cash left over.
Can I set up automatic investments after I buy the first time?
Yes. Most brokerages let you set up automatic monthly or quarterly transfers from your bank account to your brokerage, and then automatically buy a specific mutual fund with that money. This is called dollar-cost averaging and is a common way to build a fund position over time without trying to time the market.
What happens if I change my mind after I place an order?
If the order has not yet settled, you may be able to cancel it — contact your brokerage right away. Once the order has settled and the shares are in your account, you own them. You can sell them at any time, but you will pay taxes on any gains if the account is taxable.
Do I need to pick a fund company like Vanguard or Fidelity, or can I buy any fund?
You can buy funds from any company through most brokerages. Vanguard, Fidelity, and Schwab all offer their own funds, but they also let you buy funds from other companies. Some brokerages may charge a fee to buy certain funds from outside companies, so check before you buy.
What is the minimum amount I need to invest?
Most mutual funds have no minimum investment through a brokerage account, or a minimum of $500 to $3,000 for the first purchase. Some funds waive the minimum if you set up automatic monthly investments. Check the fund's details on your brokerage website to see what applies to the fund you want to buy.