Buying Mutual Funds for Your Portfolio

Buying mutual funds to populate your portfolio is the final step in constructing your portfolio. Having established the appropriate weightings and decided if you should invest a lump sum immediately, you're now ready to purchase your mutual funds. You'll probably have the option of doing this online or over the telephone, depending on where you established your account. In some cases you'll have to do it online, which is good, because that is how you should learn to mange your portfolio.

When you opened your account(s), you probably had to deposit some minimum initial amount of money. By now you should have transferred all of your investable funds into the account(s) and be ready to allocate your capital to the mutual funds you decided to purchase for your portfolio.

Buying mutual funds is easy. Whether you do it online or over the phone, you simply specify the amount of money you want to invest in each fund, there's no need to determine the number of shares you'll be buying, as it's all done in dollar amounts. The only thing you need to determine ahead of time is the minimum initial investments required for each mutual fund you've selected to ensure that the amount you plan to invest in those funds meets or exceeds the minimums. (The minimum initial investments are usually much smaller for IRAs than for taxable accounts.) Of course, you should also make sure each fund you plan to invest in is currently open to new investors, which is something that would probably have been apparent during the screening process.

When you're buying mutual funds online you should be offered a chance to read the prospectus, asked if you would like a copy of the prospectus mailed to you or required to check a box attesting that you have read the prospectus. You should have read all of the prospectuses during the process of selecting your funds.

After you've purchased your mutual funds you will receive trade confirmations in the mail unless you opted for paperless documentation, in which case they'll either be emailed to you or made available through your online account.

After that, you'll receive periodic statements of your account, amendments to the terms of your agreement with the brokerage or mutual fund company, addenda to the prospectuses and new prospectuses whenever they are updated or every 14 months, which ever is sooner, all either by mail or electronically.

If you haven't already opened one or more accounts, here are some things to consider when making your choice. Making the right choice as to where to open your account(s) will make buying mutual funds a simple, undaunting process.

• Availability of mutual funds that meet your criteria.
• Automatic sweeping of cash into a money market mutual fund.
• No or low transaction fees.
• No or lenient restrictions on switching between mutual funds.
• 24/7 telephone support for those times when a simple online transaction won't do.
• 24/7 telephone support for those times when something goes wrong with an online transaction.
• A good online mutual fund screener.
• Access to prospectuses online.
• Online access to all of your account information including documentation.
• Optional automatic investments and withdrawals if these are important to you. These options will only be available if you establish an account with a mutual fund company.

By now you should realize that buying mutual funds is not at all like going to the mall on a rainy afternoon and buying a bunch of stuff. But, having learned the process, you should now be comfortable with buying mutual funds. Once you've purchased your mutual funds and you have a working portfolio, all you need to do is monitor your portfolio's performance relative to the goals you set, keep track of your individual mutual funds to ensure they aren't drifting off course and rebalance religiously.

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Return to the Your Mutual Fund Portfolio summary page.

Move on to the next subsection, Rebalancing Mutual Fund Portfolios.