No Transaction Fee Mutual Fund

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DEFINITION of 'No Transaction Fee Mutual Fund'

A mutual fund that is offered to investors by a brokerage firm without any form of commission charged for the transaction. This structure is advantageous to the investor because it allows him or her to purchase the mutual fund without incurring an up-front commission fee on the trade. For investors with a small amount of investment capital, this can be a significant advantage.

Also referred to as an "NTF mutual fund".

BREAKING DOWN 'No Transaction Fee Mutual Fund'

Brokers are usually able to offer NTF mutual funds to their clients because the mutual fund companies that run the funds step in and compensate the brokers for their forgone commission fees. The typical arrangement is that the mutual fund company pays the brokerage firm marketing fees when an investor buys into the fund through a broker, instead of buying directly from the fund.

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