How to Buy Mutual Funds: The Steps From Opening an Account to Your First Purchase

You can buy mutual funds through a brokerage account, a retirement account, or directly from a fund company

The path to your first mutual fund purchase depends on where you want to hold it. If you are saving for retirement, you will likely buy through an IRA or 401(k). If you are saving for a shorter-term goal or general investing, you will open a brokerage account at a firm like Fidelity, Vanguard, Charles Schwab, or E*TRADE. If you already have a 401(k) through your employer, mutual funds are probably already one of your investment choices inside that account — you just select them from the menu when you enroll or make changes.

The actual purchase takes minutes once your account is open and funded. You search for the fund by name or ticker symbol, enter how much money you want to invest, and confirm the order. The fund company processes it, usually by the end of the next business day. The main work is choosing which fund to buy and deciding where to hold it.

Key Takeaways

• You can buy mutual funds through a brokerage account (for general investing), a retirement account like an IRA or 401(k) (for tax-advantaged saving), or directly from a fund company's website.
• Opening a brokerage account takes 10 to 15 minutes and requires your Social Security number, employment information, and a funding method like a bank transfer or wire.
• Most brokerages charge no commission to buy mutual funds, though some funds charge an internal fee called an expense ratio that reduces your returns over time.
• You can set up automatic monthly investments (called dollar-cost averaging) so money moves from your bank account to the fund on a schedule you choose.
• Mutual funds settle by the end of the next business day, so you cannot buy and sell the same fund on the same day.

Opening a brokerage account for non-retirement investing

If you want to buy mutual funds outside a retirement account, you will need a brokerage account. This is a regular investment account with no tax advantages but also no contribution limits or withdrawal restrictions. You can open one at any major brokerage — Fidelity, Vanguard, Charles Schwab, E*TRADE, Merrill Edge, and others all offer them with no account minimums.

The application takes 10 to 15 minutes online. You will need your Social Security number, date of birth, employment status, and a bank account or wire information to fund the account. The brokerage will ask what type of account you want (individual, joint, or trust are common). They will also ask about your investment experience and goals — this is for their records and does not restrict what you can buy. Once you submit, most brokerages approve you within minutes and your account is ready to fund.

After approval, you transfer money from your bank account to the brokerage. A bank transfer (also called an ACH transfer) usually takes three to five business days and has no fee. A wire transfer arrives the same day but may cost $10 to $25. Once the money lands in your account, you can buy mutual funds immediately.

Using a retirement account to buy mutual funds

If you are saving for retirement, you have two main paths: a 401(k) through your employer, or an IRA (Individual Retirement Account) that you open yourself. Both let you buy mutual funds with tax advantages — your contributions reduce your taxable income now, and your earnings grow tax-free until you withdraw in retirement.

If your employer offers a 401(k), you enroll through your company's benefits portal or HR department. During enrollment, you choose how much of each paycheck to contribute and which investments to buy with that money. Mutual funds are usually one of the options alongside target-date funds and stable value funds. You select your funds, and the contributions happen automatically from your paycheck. You cannot buy additional mutual funds in a 401(k) beyond the investment choices your employer's plan offers.

If you do not have a 401(k) or want to save more, you can open an IRA at any brokerage using the same process as a regular brokerage account. You will choose between a Traditional IRA (contributions may be tax-deductible) and a Roth IRA (contributions are not deductible, but withdrawals in retirement are tax-free). Once the account is open and funded, you can buy any mutual fund the brokerage offers. You can contribute up to $7,000 per year to an IRA (or $8,000 if you are 50 or older), and you can make contributions until April 15 of the following year for the prior tax year.

Finding and selecting the mutual fund you want to buy

Once your account is open and funded, you search for the fund by name or ticker symbol — a short code like VTSAX (Vanguard Total Stock Market Index Fund) or FSKAX (Fidelity Total Stock Market Index Fund). Most brokerages have a search box on their website or app where you type the name or symbol. The fund's page will show you the expense ratio (the annual fee), the fund's holdings, its performance history, and minimum investment (many have no minimum).

Read the fund's prospectus if you want details about its strategy and risks — this is a document the fund company is required to provide, and it is available free on the fund's page or the brokerage's website. You do not need to read the entire prospectus to buy; the key information (expense ratio, strategy, holdings) is usually on the summary page.

If you are not sure which fund to buy, start with a target-date fund (which automatically adjusts its mix of stocks and bonds as you approach retirement) or a total market index fund (which holds a broad sample of the stock market). Both are simple, low-cost ways to start investing in mutual funds.

Placing your first order and understanding settlement

Once you have chosen your fund, click "Buy" or "Invest" on the fund's page. You will enter the dollar amount you want to invest (or the number of shares, though most people invest by dollar amount). The brokerage will show you the current price per share and calculate how many shares you will receive. Review the details and confirm the order.

Your order is placed at the fund's closing price for that day — mutual funds price once per day, usually at 4 p.m. Eastern Time. If you place an order after 4 p.m., it will be priced at the next day's closing price. The fund company processes the order and settles it by the end of the next business day, meaning the shares appear in your account and your cash is deducted. You cannot buy and sell the same fund on the same day (this is called a "round trip" and some brokerages restrict it in certain account types).

After settlement, you own the shares outright. You can hold them as long as you want, sell them whenever you choose, or set up automatic monthly investments so money moves from your bank account to the fund on a schedule.

Understanding fees and costs

Most brokerages charge no commission to buy or sell mutual funds — this is standard across the industry. However, mutual funds themselves charge an internal fee called an expense ratio, which is a percentage of your investment deducted each year. A fund with a 0.05% expense ratio costs $5 per year on a $10,000 investment. A fund with a 1% expense ratio costs $100 per year on the same investment.

Index funds (which track a market index like the S&P 500) typically have low expense ratios, often between 0.03% and 0.20%. Actively managed funds (where a manager picks stocks) often charge 0.50% to 1.50% or more. Over decades, even small differences in expense ratios compound — a 0.50% difference can cost you tens of thousands of dollars in lost growth.

Some funds also charge a sales load, which is an upfront commission paid to the broker or advisor who sold you the fund. You can avoid this by buying directly from the fund company or through a brokerage that does not charge loads. Most modern brokerages do not charge loads on mutual funds you buy through their platform.

Setting up automatic monthly investments

Once you have bought your first mutual fund, you can set up automatic monthly contributions so money moves from your bank account to the fund on a schedule. This is called dollar-cost averaging — you invest the same dollar amount every month regardless of the fund's price, which can reduce the impact of market ups and downs over time.

To set this up, go to your brokerage's settings or the fund's page and look for "automatic investment" or "recurring investment." You will enter the dollar amount, the frequency (weekly, monthly, quarterly), and the date you want the transfer to happen. The brokerage will pull money from your linked bank account on that date and buy shares at that day's closing price. You can change or stop automatic investments anytime.

Automatic investing is optional — you can buy mutual funds whenever you have money to invest, or on any schedule that works for you. But many investors find that automatic monthly contributions make it easier to stay consistent and avoid trying to time the market.

Frequently Asked Questions

Do I have to buy mutual funds through a brokerage, or can I buy directly from the fund company?

You can buy directly from the fund company's website — Vanguard, Fidelity, and Schwab all let you open an account and buy their funds directly. The process is the same as opening a brokerage account. The advantage is simplicity if you only want to buy that company's funds. The disadvantage is that you cannot easily compare or buy funds from other companies in the same account.

What is the minimum amount I need to invest to buy a mutual fund?

Most mutual funds have no minimum investment, or a minimum of $1,000 to $3,000 for the first purchase. Some funds waive the minimum if you set up automatic monthly investments. Check the fund's page on your brokerage's website to see its specific minimum.

Can I buy mutual funds in a regular brokerage account and a retirement account at the same time?

Yes. Many people have both a 401(k) or IRA for retirement saving and a regular brokerage account for shorter-term goals or additional investing. You can buy the same mutual fund in both accounts, and they are tracked separately for tax purposes.

What happens if I want to sell my mutual fund shares?

You can sell anytime by going to your account, finding the fund, and clicking "Sell." You enter the number of shares or dollar amount you want to sell, and the brokerage sells them at that day's closing price. The cash appears in your account by the end of the next business day. You will owe capital gains tax on any profit if the fund is in a regular brokerage account (not a retirement account).

Can I lose money investing in mutual funds?

Yes. Mutual funds that hold stocks can go down in value if the stock market declines. The longer your time horizon, the more time you have to recover from downturns. Funds that hold bonds or money market instruments are less volatile but still carry some risk. Past performance does not may provide future results.