These days, there are all sorts of ways to invest in mutual funds.

If you’re a 401k investor, you have access to a menu of funds selected by your employer. Hopefully, your company has done a thorough job and offers you a comprehensive list of good funds that will allow you to build a well-balanced investment portfolio.

But if you’re looking to invest outside of your employer-sponsored plan, you have several options:

1.) You can purchase mutual funds through the fund companies directly , whether it’s Vanguard, T. Rowe Price or Fidelity, to name just a few biggies.

2.) You can buy fund via a “supermarket” which offers funds from many different providers. Many fund companies like Vanguard will allow you to set up brokerage accounts where you can buy funds from elsewhere. Many of the online brokerages that house your IRA or regular brokerage account also offer fund supermarkets.

You want to pay close attention to fees when dealing with any supermarket. While they provide the convenience of one-stop shopping, one statement and easy online access, some funds carry transaction fees – these are akin to a brokerage commission. So if you invest a little money each month into three funds that carry a $35 transaction fee, those costs can quickly add up and eat into your returns. For example, Schwab makes you pay a lot to buy Vanguard mutual funds.

Obviously, the supermarkets want you to buy their home-cooked brands, so those funds are unlikely to cost you any extra fees. You can be sure it’ll cost you less to buy Schwab funds through your Schwab brokerage account that it would to buy Vanguard’s funds.

Supermarkets usually have a list of no-transaction fee funds (these fund companies pay the supermarket a fee to get on the list, so it’s not entirely free: the expense ratio might be slightly higher) and transaction fee funds (those who don’t). Before you commit to any one supermarket, check out their wares and fee structure. If the Vanguard fund you’re after will cost a fee every time you make a deposit, look elsewhere or go to the fund company directly.

3.) Lastly, you can buy funds via a human broker or certain financial planners - it’s usually not very cost-effective to go this route – brokers will cake on extra fees like sales charges and, depending on your planner, they might too. If you really want professional help, it’s probably most cost-effective to find a financial planner that charges by the hour and can unearth some good and cheap no-load funds for you. You can read more about financial planners in our guide.

There are a few other factors to consider when buying a fund:

Timing - If you’re investing outside of a tax-deferred account, like a 401k or IRA, timing may matter. Why? Funds are required to distribute capital gains and dividends to shareholders. These distributions are taxable – so if you buy into a mutual fund right before a distribution, you’re essentially paying taxes for some sort of gain that you didn’t even benefit from.

While most distributions are made in December, some are made earlier. If you’re looking to buy a fund anytime after Sept. 1, be sure to ask the company when the distribution date is --- if there is a taxable distribution, make your purchase after it passes.

The type of account that will hold the mutual fund - You want to take full advantage of your tax-sheltered retirement accounts -- namely 401ks and IRAs -- because taxes there are a non-issue.

For your taxable brokerage account, consider tax-efficient investments such as: tax-managed funds, exchange-traded funds, index funds, municipal bond funds, and stocks you plan to hold for more than a year (at which point, any gain gets taxed at 15%; it’ll be higher if you sell sooner).

In a regular brokerage account subject to taxes, you generally want to stay away from mutual funds that generate hefty tax bills from capital gains distributions or dividends, which are better off inside your retirement accounts. These include: real estate investment trusts, or REIT funds; actively-managed stock funds; high-yield junk bond funds; corporate bond funds; and stocks you plan on trading frequently.

Want to Know More?

• What's a Mutual Fund
• How to Choose a Mutual Fund
• Grilling Guide: Questions to Ask When Choosing a Mutual Fund