E*TRADE Dollar Cost Averaging (Automatic Investing) in 2024

Does E*TRADE offer dollar-cost averaging (DCA) for stocks, ETFs and mutual funds? Enrolling in E*TRADE automatic investing plan.

Dollar-Cost Averaging with E*TRADE

Timing the market is challenging for both professional and amateur investors. This is why automatic investing plans (AIP), which use the benefits of dollar-cost averaging, are popular. Many brokers offer automatic investing options, and this article focuses on the AIP provided by E*TRADE.

What is Dollar-Cost Averaging?

Dollar-cost averaging involves building a position in a fund or stock over time by making small, regular purchases of equal dollar amounts. For example, instead of buying $12,000 of stock XYZ all at once, you might buy $1,000 worth each month for a year. In the first scenario, your cost is simply the price you paid in the single purchase. In the second, your cost is the average of the prices over the 12 months.

The Benefits of Dollar-Cost Averaging

The main benefit of dollar-cost averaging is that it reduces the risk of buying at a market peak, which is a risk when making a large, one-time purchase. By spreading out your investment, your average cost is more likely to reflect the security’s price over time, rather than just one point.

E*TRADE’s Automatic Investment Plan

E*TRADE’s AIP allows you to set up recurring purchases (weekly, bi-weekly, monthly, quarterly, semi-annual, or annual) for a fixed dollar amount in no-load, no-transaction-fee mutual funds. You must already have an initial position in the mutual fund you want to set up in the AIP, and many mutual funds on E*TRADE have minimum purchase requirements above $100.

E*TRADE and Competitors

How to Enroll

Setting up an AIP with E*TRADE is free. To get started, call 1-800-387-2331 and specify which mutual funds you want to include and how often you want to make purchases. Remember, you must already have an initial position in the mutual funds you want to enroll. E*TRADE allows up to ten AIPs per customer, with the ability to trade up to 50 mutual funds within each AIP.

How to Fund the Plan

If you set up an AIP with recurring purchases, you may want to set up matching recurring deposits to your E*TRADE account. E*TRADE allows you to match the frequency of your recurring deposits with the frequency of your AIP purchases. Keep in mind that all of E*TRADE’s AIP purchases are made on Tuesdays.

Can I Buy Stocks and ETFs with the Plan?

Only no-load and no-transaction-fee mutual funds are eligible for E*TRADE’s AIP. This is slightly less flexible than TD Ameritrade’s AIP, which includes all mutual funds on their platform. However, neither broker allows automatic investment plans for individual stocks or ETFs.

How to Change or Cancel Your Enrollment

You can change or cancel your E*TRADE AIP at any time. However, be aware that E*TRADE charges a short-term trading fee of $49.99 for any no-load, no-transaction-fee mutual fund sold within 90 days of purchase.

E*TRADE Automatic Purchases Conclusion

If you already have an E*TRADE account and want to build a diversified portfolio of mutual funds over time, their AIP is a good option. However, if you haven't chosen a broker yet and value a broad range of mutual funds in an AIP, you might want to consider TD Ameritrade’s plan, which offers a wider selection of funds.