How to efficiently invest in ETFs with a monthly contribution?
I am confused when it comes to ETFs. Many state that their main advantage is that they are low cost. I understand that they are traded as stocks. I want to invest my money in 3 index ETFs (USA, world and bonds) and split my monthly contribution of 0 in these 3 funds.
From my broker's page I see that every time I buy an ETF, I have to pay about a commission as well as a holding cost per month! Is this normal?
How is this supposed to be good investment since I'll be losing so much every month for commissions and holding fee? Am I missing something about ETFs? Is a one-time contribution the only way to avoid this?
Edit: just to mention that i am from a European country and it is not possible to use an US based broker.
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The commissions on this account are killing you. To stick with this broker you are much better off investing in mutual funds. You can do so directly, or perhaps through this broker. However, I fear that they will charge fees for that as well.
Also you might have to focus on one fund at a time to meet the minimum investment.
As you state your goal with ETFs is to reduce cost, a worthy endeavor that is thwarted by this broker.
Currently ETrade, Fidelity, Vanguard, and Schwab all trade certain ETFs for free. While I am sure there are others out there, I would stick with those. Keep in mind, the ETFs you are targeting might not trade for free.
ETFs are trendy, and they certainly have their advantages, but regular monthly investing is not one of them if you are paying transaction fees.
Don’t forget that traditional mutual funds are still great places to invest if you find the right ones. Stick with no-load, low expense index funds and you can add money to your investment each month at no cost. The only thing you have to be aware of is that many mutual funds have a minimum initial investment, so if you don’t already have enough money ready to go, you may need to save up for a bit until you have enough to open the mutual fund account.
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