Expert: Paul Henneman - 10/7/2007

Question
Hello!

I am 32 and have began to invest for retirement.

I have a couple questions if you don’t mind:

1)   I plan to start an 403B and an IRA. I have some investments in mind (eg: Int value funds, U.S. Value funds, S&P 500 index funds etc).

Now my question is to fit these investments I have in mind, should I choose Mutual funds or ETF’s?

2)   I noticed that when I go to buy a mutual fund through a broker, I am charged a transaction fee (say $20). I heard that if I buy that same mutual funds directly through the company that offers it I pay no transaction fee. For example, if I want to buy a Vanguard Large Cap Mutual Funds from Scottrade I would pay say $20 in fees. But If I bought that fund directly from Vanguard there would no fee.

So if this is the case, then why do people buy mutual funds through a broker vs directly from the company.

Thank you

Asad Raza
Asad_raza5367@hotmail.com


Answer
Asad,
   Thank you for your question! Generally the reason that people go through a broker, or online service, to buy and sell funds is the convenience. Through a service like Scottrade.com (there are many others), you can buy or sell any of the thousands of mutual funds (and thousands more individual stocks) quickly and easily.  Should you wish to sell the mutual fund and purchase a different one, it is very simple. Just enter your order, and the service generally executes the order immediately. It is also simple to add more money to the account, and then purchase more shares.
   It depends upon how important the fees are to you. You can certainly trade for less directly at the source, but lose much of the convenience. This may be ok if you do not plan to be trading much.

I hope that this helps! Please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com