In my quest to simplify my investments, I discovered that discount brokerages carry no transaction fee/no load mutual funds, with some at very low expense ratios, even 0% in a few cases. This was somewhat new news to me.
As I convert to owning mainly index funds, versus individual stocks, I was mainly considering ETFs. In my mind, mutual funds generally had higher fees and usually traded after the market closed at NAV. However, I have changed my mind.
Having funds trade after market close offers a couple benefits. First, I can sell funds for a gains and buy back at the same price. This allows me to take use a hack to take longer term capital gains periodically to manage my taxable income. I sell the position for the gain and buy back immediately at the same price to raise the cost basis. Second, I don't have to deal with volatility during the hours the market is open.
First, I checked Schwab, which is one of my self-directed brokerages. Schwab has several index Mutual Funds that have expense ratios of 0.02-0.06%, including an S&P index and International index Funds. Then I checked Fidelity. Fidelity has a wide range of index Mutual Funds with low expense ratios of 0.02-0.06% and even a few at 0%. Finally, I checked Merrill Edge. Merrill Edge also had a wide range of Index Mutual funds, but most (all but 19) have expense ratios above 0.50%. In all cases, there were no transaction fees (NTF). In the case of Merrill Edge, load fees are waived.
Since we have accounts at all three brokerages, I will be looking to use the NTF Index Mutual Funds with low expense ratios at all three. At first, I was going focus only on U.S. stocks. However, with the expanded options available, I will also consider and International index Mutual Fund.
Disclosure: I was not compensated by Schwab, Fidelity, nor Merrill Edge for writing this post.
This is not financial nor investing advice. Please consult a professional advisor.
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