Does TD Ameritrade offer commission-free mutual funds? What NTF funds families are available at TD Ameritrade?

Overview of Free Mutual Funds at TD Ameritrade

If you’ve recently opened an account with TD Ameritrade you may be wondering about their offering of mutual funds. Ameritrade currently offers more than 12,000 mutual funds on their platform, about 4,000 of which are offered with no transaction fee (NTF) or load-fee. These funds cover a wide variety of investing styles and strategies and are managed by hundreds of fund families, including investor favorites like Vanguard and Fidelity. This article will provide an overview of Ameritrade’s offerings of NTF mutual funds.

TD Ameritrade Free mutual funds

Fund Families Offered on TD Ameritrade

TD Ameritrade’s mutual fund offerings span hundreds of different fund families, including the most popular names in the industry. Using their fund screening tool, you can see that from Vanguard and Fidelity alone they offer more than 1,000 NTF mutual funds. Other popular fund families they offer include John Hancock, PIMCO, American Funds, BlackRock, T. Rowe Price, and Schwab, among many others.

Load and Transaction Fees

Most mutual funds come with a load fee, which is basically a 3-6% purchase premium or redemption fee that an investor pays either when they purchase or sell shares in a mutual fund. Transaction fees are separate and at Ameritrade this fee is $49.95 per trade. We’ve narrowed down Ameritrade’s ~12,000 mutual fund offerings to the ~4,000 that don’t charge a load fee and are also commission-free to trade in your Ameritrade account.


Open TD Ameritrade Account

Short-Term Trading Fees

Even though the ~4,000 mutual funds we’re discussing here are NTF, it’s important to note that they still have costs associated with them. If you sell any of the NTF funds within 180 days of your most recent purchase, Ameritrade will charge you a $49.99 short-term trading fee. This is meant to encourage investors to view Ameritrade’s mutual funds with a long-term investing mindset.

Expense Ratios

Even besides the short-term trading fee, there are more relevant costs that you will have to pay on all NTF mutual funds – the expense ratio. Every mutual fund will have an expense ratio presented as an annual % of your investment that the mutual fund manager automatically collects from the fund’s assets in order to cover the fund’s management and operational costs. The expense ratios on Ameritrade’s 4,000 NTF mutual funds range from just 0.16% to as much as 4.5%, with the average being about 1.2%. Most of the expense ratio goes toward paying the fund’s managers and research team, and this is why the funds with more active strategies tend to have higher expense ratios.

Morningstar Ratings

Morningstar’s 5 star rating system for mutual funds is one of the most closely-followed ratings that investors watch because of its objective and formulaic scoring system. Morningstar has been issuing objective mutual fund ratings for decades now, and therefore are one of the most trusted sources. Morningstar groups all mutual funds into categories or style boxes based on the similarity of their exposures and characteristics. Their mutual fund rating is then calculated purely based on a fund’s historical performance relative to that of the other funds in its group.

Roughly two-thirds of the ~4,000 NTF mutual funds offered by Ameritrade have a Morningstar rating of 3 stars or higher. 37% have a 3-star rating, 22% a 2-star rating, and just 9% have the full 5-star rating. Next, we’ll highlight a couple of the most popular NTF mutual funds at Ameritrade.

American Funds American Balanced Fund

With $140 billion in assets under management and an overall Morningstar rating of 5 stars, the American Funds American Balanced Fund (BALFX) is a popular NTF mutual fund that TD Ameritrade clients might want to check out. It is a diversified mutual fund that seeks to generate both long-term capital appreciation as well as passive income through investing mostly in equities but also with a modest allocation to bonds. Through May of 2019, the fund has returned 6.2% with a dividend yield just under 2%. The expense ratio is also fairly attractive for a multi-asset class fund at 0.64%.

TD Ameritrade Free American Fund

PIMCO Income Fund

PIMCO’s Income Fund (PIINX) is another popular mutual fund that is free of transaction and load fees on Ameritrade’s platform. This fund has an impressive $125 billion in assets under management, a 5-star overall rating from Morningstar, and a fairly average expense ratio of 0.99%. In contrast to the previous example from American Funds, the primary objective of PIMCO’s Income Fund is to generate current income, with creating long-term capital appreciation being a secondary objective. This is easy to see when looking at the fund’s distribution rate, which is currently above 5%. The fund invests mostly in government, corporate, securitized and high yield debt.

TD Ameritrade Free Pimco Fund

TD Ameritrade Free Mutual Funds Summary

In summary, Ameritrade has one of the strongest selections of cost-effective mutual funds that come free of transaction and load fees. The 4,000 NTF mutual funds on their platform encompass all major mutual fund style categories and come from hundreds of different fund managers, including trusted names like Vanguard, Fidelity, PIMCO, and American Funds. A good portion of these funds are also attractive from the standpoint of having strong Morningstar ratings and expense ratios at or below the industry average.

Open Account

Open TD Ameritrade Account

Continue Reading