How to Buy Mutual Funds: A Comprehensive Guide

Your Guide to buying the best Mutual Funds


Mutual Funds are a great investment option for those seeking to diversify their portfolios and take advantage of long-term growth potential. A Mutual Funds buying guide can help you understand the basics of investing in Mutual Funds, including the different types of funds available, how to research potential funds, and how to choose the right one for you. This guide will provide an overview of Mutual Funds, their benefits and risks, and the steps involved in selecting a fund that is best suited to your financial needs.

Key features

  1. Type of Mutual Fund - Understand the different types of funds available and choose the one that best aligns with your financial goals. Examples include money market funds, bond funds, index funds, and target-date funds.
  2. Objective - Review the fund's stated investment objective, which states the types of securities the fund will invest in and the performance it is aiming for.
  3. Expense Ratio - Be aware of the fund’s expense ratio, which is the percentage of your investment used to cover administrative costs, management fees, etc.
  4. Minimum Investment - Check for minimum investment requirements. Many mutual funds require a minimum initial purchase of $500 or more.
  5. Risks - Understand the risks associated with the fund, such as market risk, liquidity risk, and credit risk.
  6. Past Performance - Consider the past performance of the fund. Long-term performance is more indicative of the fund's true potential for generating returns.

See the most popular Mutual Funds on Amazon

Important considerations


  • Low Barriers to Entry: Mutual funds provide a relatively low barrier to entry for investors since a minimum initial investment can be as low as $500.
  • Diversification: Mutual funds are typically well diversified, meaning that the risk in any one investment is minimized.
  • Professional Management: Mutual funds are typically managed by professional investors, who bring an additional level of objectivity and expertise.
  • Economies of Scale: Mutual funds provide economies of scale, allowing investors to benefit from lower costs per share.
  • Wide Selection: Investors have access to a wide selection of mutual funds, allowing them to find the fund that best suits their investment goals.
  • Liquidity: Mutual funds provide investors with the ability to quickly and easily liquidate their investments.


  • Expense Ratios: Mutual funds typically charge an annual fee, which is known as an expense ratio. This fee will be taken out of the fund’s assets, decreasing the amount you have invested.
  • Volatility: Mutual funds can be subject to higher volatility due to the diversity of stocks they hold. This means that the value of the fund can change rapidly, leaving your investments vulnerable to losses.
  • Tax Liability: Mutual funds are subject to taxation, which can reduce the amount of money you make from your investments.
  • Professional Management: Mutual funds are managed by professionals, which can be beneficial in terms of expertise, but can also be costly.
  • Minimum Investment: Mutual funds usually require a minimum investment, which can make it harder for those with smaller budgets to invest in them.

Best alternatives

  1. Exchange-Traded Funds (ETFs) - ETFs are a type of investment fund that tracks the index of a particular market, such as a stock market index, and are traded on an exchange.
  2. Stocks - Stocks are a type of investment that represent ownership in a company. Investors can buy or sell stocks to gain or lose capital depending on the performance of the company.
  3. Bonds - Bonds are a type of debt instrument that can be issued by governments and corporations. They are used to raise capital and pay the holder a fixed rate of interest.
  4. Real Estate - Real estate is another form of investment that can provide diversification and long-term appreciation. Real estate can be purchased in the form of residential and commercial property, land, or even shares in real estate investment trusts (REITs).
  5. Alternative Investments - Alternative investments are investments that do not fit into the traditional categories of stocks, bonds, or cash. These investments may include commodities, collectibles, hedge funds, and private equity.

Related tools, supplies, and accessories

  • Financial Software - A program used to help investors analyze and monitor their investments.
  • Research Tools - Resources and information used to help investors make decisions about their investments.
  • Planning Tools - Software programs used to plan retirement, tax, and estate strategies.
  • Asset Allocation Tools - Software and research tools used to help investors determine the best mix of investments for their financial goals.
  • Online Brokerage - Online services which provide access to buying and selling securities.
  • Financial Advisors - Professionals who provide advice on investments.

Common questions

  1. What is a Mutual Fund? A mutual fund is an investment vehicle made up of a pool of money collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments, and other assets.
  2. What are the benefits of investing in Mutual Funds? Mutual funds offer investors the benefits of diversification, professional management, economies of scale, and a wide range of investment options. In addition, mutual funds are relatively liquid investments, making it easy to buy and sell shares.
  3. What are the different types of Mutual Funds? Mutual funds are usually categorized based on their investment objectives, such as growth, income, or capital appreciation. Within these categories, funds may invest in stocks, bonds, money market instruments, or a combination of these assets.
  4. What are the risks associated with Mutual Funds? Mutual funds are usually subject to market risk, which is the risk that the value of the fund’s securities will decline due to changes in market conditions. Mutual funds may also be subject to management risk, which is the risk that poor investment decisions by the fund’s manager will result in losses for the fund.
  5. What fees are associated with Mutual Funds? Mutual funds typically charge a variety of fees for their services, such as management fees, administrative fees, and sales charges. These fees can vary significantly from fund to fund, so it is important to carefully review the fund’s prospectus before investing.
  6. How do I choose a Mutual Fund? Choosing a mutual fund is a personal decision and should be based on your investment goals, risk tolerance, and financial situation. It is important to do your research and carefully review a fund’s historical performance, expenses, and portfolio composition before investing.


A funny fact about mutual funds is that some investors have gotten confused when filling out their investment paperwork and ended up investing in the wrong fund. This happened to one investor in 2018 who thought they were investing in a technology fund when they were investing in a fund for golf courses. Fortunately, they noticed the mistake before too much damage was done! Source: Fox Business.

Disclaimer: This buying guide was not created by humans, and it is possible that some of it's content is inaccurate or incomplete. We do not guarantee or take any liability for the accuracy of this buying guide. Additionally, the images on this page were generated by AI and may not accurately represent the product that is being discussed. We have tried to convey useful information, but it is our subjective opinion and should not be taken as complete or factual.