No Transaction Fee Mutual Fund

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What is a 'No Transaction Fee Mutual Fund'

A no transaction fee mutual fund is a mutual fund with no associated trading fees. No transaction fee mutual funds are typically bought directly from the mutual fund company or through discount brokerage platforms. No transaction fee mutual funds are advantageous to the investor because it allows him or her to purchase the mutual fund without incurring any sales charges on the trade. No transaction fee mutual funds may also be referred to as NTF mutual funds or no load mutual funds.

BREAKING DOWN 'No Transaction Fee Mutual Fund'

No transaction fee mutual funds are available to investors through a few different channels. They can be purchased directly from a mutual fund company, bought through a discount brokerage or transacted through a distributor.

A transaction fee is the sales charge associated with buying or selling a mutual fund. Transaction fees and fee schedules are determined by the mutual fund manager and detailed in the fund’s prospectus.

Transaction fees can be structured in a variety of ways. The transaction fee for a mutual fund typically depends on the channel for which it is bought. However, some funds may be structured with no transaction fees at all through any distribution channel.

Select Funds

Funds structured with no transaction fees are the purest form of no transaction fee mutual funds. These funds do not require sales charges through any distribution channel. They are often found on a short list of NTF mutual fund offerings marketed by brokerage firms. The T. Rowe Price Equity Income Fund (PRFDX) is one example. This fund can be bought from T. Rowe Price or through various intermediaries with no sales charges. It is marketed by Schwab on their OneSource Select List. Many discount brokerages offer short lists of NTF mutual funds for investors.

Mutual Fund Company Transactions

In some cases, an investor can buy a mutual fund without transaction fees through the mutual fund company itself. If an investor chooses to buy mutual funds through the mutual fund company they must create an account with the mutual fund company to facilitate transactions. Mutual funds can be bought and sold through a mutual fund company, often with no transaction fees.

Discount Brokers

Discount brokers may also offer certain mutual funds with no transaction fees through their discount brokerage platforms. Buying mutual funds through a discount broker can often save investors considerable amounts of capital.

The ClearBridge Aggressive Growth Fund is one example. The Fund’s prospectus outlines its sales charge schedule for the purchase of shares through an intermediary. The maximum sales charge on the investor class of shares is 5.75%. The fund company offers breakpoints at various levels for discounts. Investors also have a few options for buying the fund with no transaction fees. Discount brokerages such as Charles Schwab allow investment in the fund through their discount brokerage platform for no fee with a minimum investment of $100. The Fund is also associated with Legg Mason which allows investors to buy it without transaction fees through a Legg Mason account.

NTF Mutual Fund Options

Overall, investors have a wide variety of options for no transaction fee mutual funds. By understanding their transaction options and doing thorough due diligence on transaction fees, investors can potentially save significant amounts of capital.