Can I Buy S&P 500, Dow Jones, and NASDAQ Index Funds on TD Ameritrade?

Can You Buy Index Funds on TD Ameritrade Account?

The answer is a strong “Yes!”. Index mutual funds are passive investment products that, very similar to index-tracking ETFs, track the performance of various stock indices such as S&P 500, Dow Jones, NASDAQ.

TD Ameritrade currently offers more than 500 index mutual funds for you to trade in your account, such as the iShares MSCI Asia ex Japan Index Fund (BAJIX), which tracks the MSCI AC Asia ex Japan Index.

Generally speaking, when compared to index-tracking ETFs, mutual funds have somewhat higher expense ratios and higher minimum required investments. While ETFs trade throughout the trading day, mutual funds are only valued and transacted at the end of each day, making them somewhat more challenging to trade. For these reasons, if an index you are looking to invest in is covered by both an index mutual fund and ETF, in most cases it just makes more sense to choose the ETF.

Can I Buy Index Funds on TD Ameritrade

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Can You Buy Bond Funds on TD Ameritrade Account?

Yes, investors can buy bond funds on TD Ameritrade. Bond mutual funds are a great tool to add to any diversified portfolio and are one of the most efficient ways to gain exposure to the fixed income markets.

TD Ameritrade offers almost 3,000 different bond mutual funds to invest in, covering most sectors of the fixed income market, including corporate, government, and securitized debt. In this article, we will cover some of the most popular fixed income sectors within these three major categories, all of which can be invested in through various mutual funds on Ameritrade.

Can I Buy Bond Funds on Ameritrade

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Mutual Funds Focused on Corporate Debt

TD Ameritrade offers many mutual funds that invest in corporate debt. Corporate bonds are issued by companies as a way to raise funds for special projects and day-to-day operations.

High Yield Bonds

Within this category there are different niche markets, such as high-yield bonds, which as the name implies, refers to bonds that offer a higher return because the perceived risk of the issuing entity is higher. Any bond with a credit rating below BBB is generally considered “high yield”, with higher rated debt referred to as “investment grade”.

Convertible Bonds

There are also mutual funds that specialize in convertible bonds, such as Calamos Convertible Fund (CCVCX), which are corporate bonds that have an embedded option where the bondholder can convert the bonds into the company’s common stock at a predetermined conversion ratio. When and if the company’s stock reaches the price at which the conversion would be profitable, the convertible bond’s price tends to trade similarly to the stock.

Mutual Funds Focused on Government Debt

Mutual funds that hold government bonds are some of the most popular within the fixed income universe of funds, and include global developed and emerging sovereign debt, municipal bonds, and inflation-linked bonds. Most governments issue debt of varying maturities on a regular basis to fund their operations (such as U.S. Treasuries or British Gilts). Many factors impact the yield on government bonds, including the time to maturity, the country’s economic condition (which will impact the government’s ability to levy taxes to pay back the debt), and the country’s interest rate environment.

Municipal Bonds

Municipal bonds (munis) are another popular investment offered through the mutual funds on Ameritrade and are debts issued by local governments at the state and city level in the U.S. to fund infrastructure projects. Interest on muni bonds is generally tax-exempt, which can give these bonds a competitive advantage over other fixed income sectors.

Inflation-Linked Government Bonds

Inflation-linked government bonds, such as U.S. TIPS, are like regular government bonds except they protect the investor against inflation. These would be attractive to investors that are worried about a decline in the purchasing power of the currency the bond is denominated in because the government automatically adjusts the principal of the bond every day for changes in the CPI (the government’s official measure of inflation).

Mutual Funds with Exposure to Securitized Debt

Securitized debt refers to hundreds or thousands of consumer debts that are pooled together into diversified packages for investors. Most securitized debt is linked or secured to a physical asset, such as a house or car, but also includes other consumer debt, such as credit cards and student loans. There are fewer mutual funds that offer pure exposure to securitized debt, however many diversified bond mutual funds include exposure to securitized debt. For example, the Thrivent Opportunity Income Plus Fund (AAINX) invests almost 24% of its assets in securitized debt.