In general, there are three main ways that investors buy mutual funds. This article provides a breakdown of each as well as the factors that might lead you to prioritize one method over another.

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Market participants can access mutual funds through one of the following three methods:

• Purchasing through a broker
• Directly from a mutual fund provider
• Investing in a retirement plan like a 401(k)

One of the most common ways to buy mutual funds is through a broker or online trading platform. Like stocks, mutual funds trade with an assigned ticker symbol, which allows you to search and analyze the asset before purchasing. This can be done online through a broker’s website or trading platform as well as in person at a branch.

Brokers typically charge commissions and other fees for using their service. These fees are not unique to mutual funds but apply to the entire range of assets you access through that service provider. Typically, mutual funds are structured as an exchange-traded product, with fees and commissions similar to what you’d pay for accessing stocks.

Mutual funds that come with a sales charge or commission are referred to as load funds. Annual commissions on load funds can run as high as 5.75%, although this varies greatly based on the broker. Although load funds can be considered expensive, they are usually offset by a mutual fund’s competitive expense ratio. From a cost perspective, this leaves you better off in the long term, especially if you adopt a buy-and-hold approach.

Investors also have the option of purchasing a mutual fund directly from the provider. This is especially pertinent if you want to invest your money in a specific mutual fund or family of funds offered by a single company. Registration and payment are typically done online. This gives you the option of opening up a regular account or retirement account directly with the mutual fund provider.

Direct investing is beneficial because it allows you to set up automatic, recurring contributions. This is ideal for investors who are committed to dollar-cost averaging over a long-term horizon. However, the biggest benefit of direct investing is bypassing broker fees and commissions. This means more money is allocated to buying shares as opposed to paying the broker.

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In today’s business world, companies regularly offer their employees retirement benefits that can greatly accelerate savings. One of the most common is the 401(k). Through a 401(k) or any other retirement plan, the company will allow you to invest in mutual funds directly through the plan. Many companies also match their employee’s monthly contributions up to 6% of their annual salary. This means you can contribute a set percentage each year to a mutual fund and have your employer match that contribution.

Although this is a great way to boost your portfolio, one of the biggest downsides is a lack of investment options. Unlike brokerage accounts, the range of mutual funds offered by your employer through a 401(k) or similar retirement plan is likely to be much smaller. That being said, the employer match is a popular option for investors looking to make steady and sizable contributions to their favorite funds.

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A competitive broker environment and attractive employer retirement plans have made mutual funds more accessible than ever before. You now know the three most common methods for purchasing mutual funds for long-term growth.

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