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Q: I don't have much investing experience but would like to buy shares of a mutual fund online. What do you think? From a reader via e-mail.

A. I think you're better off either finding a broker with whom you'd like to work and do your fund investing through them. Or, if it's a no-load fund that's caught your eye, purchasing shares of it directly from the fund family offering it. Here are three reasons why:

  • Experience. As a new or even nearly new investor, odds are you'll need some help and guidance deciding which funds are appropriate for you, fall within your risk parameters and invest into securities that you believe will be winners over the long haul. A broker or financial planner can help you understand the markets, mutual fund investing and guide you towards funds that might meet those personal investing needs.

    Even the licensed representatives answering the phone lines at no-load fund families can offer direction. Perhaps not as extensively as say a financial planner might, but more and more no-load fund families offer indirect investment advice either through the literature they offer prospective shareholders, data on their web sites, or in very general terms, from their phone representatives.

    So, even though the fund screens that different online brokerage firms make available are wonderful tools, there's nothing quite talking about your personal fund investments with an experienced investment professional---especially if your are new to fund investing.

  • Time. While the print ads and commercials might lead you to believe otherwise, opening an account online doesn't take an instant. Nor once it's opened, does it mean that you'll be able to purchase your fund shares that same day.

    For example, it took me three different tries at one online brokerage firm just to open the account. Then, once the online forms had been completed and submitted correctly, another day before the account was approved for trading. Even then I couldn't place an order: Money needed to be either wired, transferred or mailed into the account before the order could be accepted.

    In the personal world of brokers and planners, there are still account forms to be filled out and monies needed but sometimes accounts can be opened and orders placed--and filled---on the same day.

  • Money. Although you can save a great deal on commissions when you buy stocks online, purchasing fund shares this way is often no bargain.

    While there are oodles of funds to invest in online that have no-transaction fees tacked on to them, that's not always the case. At DLJdirect, for instance, investing in a no-load fund will cost you $70 round trip: $35 when purchasing fund shares and $35 when selling them.

    Visit Schwab.com and decide to purchase shares of a mutual fund other than one of the 1700 listed in their OneSource Program and you'll pay a transaction fee. For a $1000 investment into one such fund the transaction fee would be $39.00 less 20 percent for investing online. At Fidelity.com, mutual fund transaction fees can cost $75 should you choose a fund that's not a part of their no transaction fee program.

    If you're invested in a load fund, i.e. one with a sales charge, buying them online could mean you escape transaction fees, but there will still be the fund's sales charges to pay, as you would through a broker.

Having said all of that, if you're mind is really set on online mutual fund investing, plan on spending a few hours doing your research to compare things like commissions and fund offerings from the various firms. And, check out www. gomez.com. or www.superstarinvestor.com . Both offer evaluations and ratings of online brokerage firms.

To read more articles, please visit the column archive.

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