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Charles Schwab Automatic Investing Plan
2023: Does Charles Schwab have automatic investment plan (AIP) contributions? Charles Schwab dollar cost
averaging program setup and review. Monthly/weekly AIP/DCA/recurring investing fees on ETFs, stocks, and mutual funds.
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Does Charles Schwab Offer an Automatic Investment Plan?
If you’re looking for a place to establish automatic recurring investments, Charles Schwab is definitely one broker worth checking out. Here are the details:
Schwab Automatic Mutual Fund Purchases
Schwab has a service called an Automatic Investment Plan (AIP). It allows customers (free of charge) to set up recurring purchases (not sales or exchanges) of eligible mutual funds.
All of Schwab’s OneSource funds are eligible. These are mutual funds with no load and no transaction fee. Other funds may be eligible, and some OneSource funds may not be. For example, if a fund is closed to new investors.
Unfortunately, stocks and ETF’s are not eligible for systematic purchases in self-directed accounts at this time. Notice that we said self-directed.
The one workaround here is to open a robo account at Schwab. It’s possible to establish periodic cash transfers from an external bank account into the automated brokerage account. These systematic deposits will automatically be invested into the account’s portfolio of ETF’s. Technically, this isn’t part of Schwab’s AIP. But nevertheless, it is a form of automatic investing.
Either form of automatic investing requires cash coming into the brokerage account first. If there is no free cash balance or cash margin balance, no purchases can be made.
Schwab Recurring Deposits
So how exactly do you establish recurring transfers of cash into a self-directed or robo account at Schwab? It’s very easy.
Just log into your Schwab account on the website and look for the Accounts tab in the upper-left menu. Hover over that and select Online Transfer from the drop-down window.
On the next page, you’ll have the financial conglomerate’s transfer form (it can be used to move either cash or securities from any type of financial institution). Select cash only to move money from a bank account. The checking or savings account will need to be linked to your Schwab account. This is easy to do as well. There’s a drop-down menu in the From field. Click on this and select “Add External Account.” You can connect the external bank account using trial deposits or login credentials.
If you have a Schwab Bank account, the link is already established.
Once you have the connection between the deposit account and the Schwab investment account, moving funds is easy. On the transfer page, there is a Frequency field. In this field, you can choose one of several transfer frequencies. These include:
- One time
- Weekly
- Monthly
- Last business day
- Quarterly
- Annually
- Twice a year
- Twice a month
If the cash transfer comes into a robo account, the money will automatically be invested. There’s nothing you need to do. If it comes into a self-directed account, there’s a little more red tape to get through.
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Enrolling in an Automatic Investing on Schwab
You’ll need to enroll specific mutual funds in Schwab’s Automatic Investment Plan to convert the available cash into automatic purchases. To do this, you have two options: a paper form and an electronic form. Obviously, the e-form is easier and quicker. In either case, you do have to hold the mutual fund in your account first.
After you have made an initial purchase of the fund you want, it’s time to get systematic purchases set up. As already mentioned, online enrollment is simpler. The paper form has to be turned in at a Schwab branch or mailed to an address listed on the form.
You’ll probably want to use the more convenient digital form. To access the online AIP enrollment form, head over to the positions page in your account (Accounts -> Positions).
Each security in the account will have its own row of details, like quantity and price. At the very end of this line is an icon with three horizontal lines and a down arrow. Click on this and you’ll get a drop-down window with several selections, one of which is Automatic Investment Plan. Click on this link to get Schwab’s AIP enrollment form.
You can also pull up the form by hovering over the Trade tab in the top menu and selecting Automatic Investing under the Mutual Funds section.
Each fund has to be individually enrolled, which is a slight inconvenience. But it doesn’t take too long. Just enter the purchase amount (the minimum is $100), the investment frequency (there are several choices), and the start date.
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Schwab Automatic Investing Details
There must be cash in an account that’s available for trading before an auto purchase will go through.
Because Schwab’s AIP uses whole-dollar amounts, it’s a form of dollar-cost averaging. This investment method purchases shares of securities at periodic intervals. When prices are low, more shares are acquired.
Automatic purchases of mutual funds at Schwab can be stopped or edited. To do this, just go back to the Automatic Investing section on the Schwab website and click on the link to edit an enrollment. The paper form can also be used to edit an existing enrollment.
Shares of mutual funds purchased through AIP are not subject to Schwab’s short-term redemption fee, which is a great policy.
Besides cash transfers from an external bank deposit, AIP purchases can be funded by direct deposit or internal transfers from other investment accounts. Schwab does recommend getting the funds in a few days before a scheduled AIP purchase.
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Chad Morris is a financial writer with more than 20 years experience
as both an English teacher and an avid trader. When he isn’t writing
expert content for Brokerage-Review.com, Chad can usually be found
managing his portfolio or building a new home computer.
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