Etrade Automatic Investing Plan

2020: Does Etrade offer automatic investment plan (AIP)? Etrade dollar cost averaging program (DCA) setup and review. AIP/DCA fees on ETFs, stocks, and mutual funds weekly/monthly/quarterly auto investing.

Does E*Trade Offer Automatic Investment Plan?

Investors at E*Trade can establish an automatic investing plan (AIP) ONLY for the broker’s no-load, no-transaction-fee funds. The service costs nothing, and setting it up is straightforward. There is an educational video on the broker’s website that presents the details of E*Trade's automatic investment plan, and the broker also has a convenient FAQ for this service.

Eligible Products

For its AIP, E*Trade offers only no-load, no-transaction-fee funds. Stocks, ETF’s, and other mutual funds, such as load funds, cannot be set up for automatic purchases. That’s a disappointing, since with TD Ameritrade's AIP they can establish automatic investing for all mutual funds.


E*Trade Dollar-Cost Averaging

E*Trade’s automatic investing plan is a type of dollar-cost averaging. This means you’ll be purchasing a fixed-dollar amount each month, or each interval, instead of buying a fixed number of shares, as you would with automatic purchases of stocks and ETF’s.

For example, you might purchase $100 each month of AVPAX, the American Beacon Small Cap Value fund. This security is on the broker’s list of no-load, no-transaction-fee funds. When the NAV is low, you will receive more shares, and when the NAV is high, the $100 will buy fewer shares. The advantages of dollar-cost averaging are (1) you can buy fractional shares, which you cannot do with ETF’s and stocks; and (2) you get more shares when the price is low.

Funding the Regular Purchases

The first step is to establish a regular deposit into your E*Trade investment account. Obviously, you will need funds to make regular purchases; so you need to have money coming into your brokerage account at regular intervals. E*Trade allows for weekly, bi-weekly, monthly, quarterly, semi-annual, and annual transfers. Once you establish this automatic transfer from an external bank account (which could include E*Trade Bank), it will repeat itself until you cancel it.

How to Set up the E*Trade Automatic Investing Plan

E*Trade permits up to ten automatic investment plans per customer. Each plan can trade up to fifty mutual funds; so you could in theory enroll up to 500 funds for automatic purchases.

To do so you will need to contact the broker at 1-800-387-2331. You’ll need to specify the purchase frequency you want. The available choices are once per week, every other week, once a month, once a quarter, once every six months, or once per year. AIP orders are placed only on Tuesdays.

Once a plan has been established, it will go into effect immediately. If you change your mind in the future, you can simply modify it.

Remember that each fund must have a pre-existing position, meaning that a fund must first be purchased before an AIP can be established. Each fund at E*Trade will have its own minimum purchase amount, which often is higher than $100.

If you set up an automatic investing plan in an IRA, remember that regular deposits count towards the account’s maximum annual contribution limit.

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E*Trade Pros

  • Quality trading platform
  • Timely trade executions
  • Courteous, professional, and prompt customer service
  • Easy access to education and information
  • Continuous updating and improvement of trading platforms and website
  • No fees or charges for inactive accounts

E*Trade Cons

  • High costs for phone-assisted trading
  • No personal "hand holding" by a broker (common to many online discount brokers)

Etrade Automatic Investing Conclusion

In summary, E*Trade is one of the largest online brokers and provides a quality trading service with reasonable commissions. Added value comes from the many free resources such as education, training, and stock news and information. If commissions are important to you then go with a better priced broker such as M1 Finance (read review).