Use An ELP or Buy Mutual Funds Online?
Dave tells a listener that the biggest thing to look for when buying a mutual fund is to find a broker with the heart of a teacher, which is hard to find with an online service.
QUESTION: A listener asks what the disadvantage is to buying mutual funds online instead of with an Endorsed Local Provider.
ANSWER: There’s no real advantage to buying mutual funds online. Mutual funds that charge commissions are going to charge a commission whether you go through an ELP or not. There’s no discount brokerage if you go through an online broker versus one of our ELPs.
The disadvantage is substantial. Several studies have shown that brokers without the heart of a teacher fail to help people hold their mutual funds through a downturn. That is devastating in the world of investing. You need to buy and hold – forever.
For example, when the market turned down a couple years ago, people were bailing out too soon. If you have a broker who has the heart of a teacher, he or she will walk with you in the downturns and help you understand when you first start investing.