Automatic Investment While Avoiding Fees?

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Mariogs37
Posts: 1
Joined: Thu Jan 11, 2018 12:18 pm

Automatic Investment While Avoiding Fees?

Post by Mariogs37 »

Hi all,

I've recently set up my first brokerage account, investing $3,800 into VTSMX using Merrill Edge. They charged me $19.95 to do this. I'm planning on investing $1,600 of my paycheck (every two weeks) into this account.

However, I know BogleHeads *hate* fees and this essentially amounts to $20 / $1,600 = 1.25%!

Any way around this? I've seen what high expense ratios can do to long-term wealth so I'm very hesitant to pay this on a regular basis...

Thanks!
tenkuky
Posts: 1405
Joined: Sun Dec 14, 2014 4:28 pm

Re: Automatic Investment While Avoiding Fees?

Post by tenkuky »

Is it possible the commission is due to it being a mutual fund?
What is ME's commission on ETFs/stocks?
VTI is the ETF equivalent of VTSMX and may be available at lower cost.
Furthermore, DRIP (dividend reinvestment plan) automatically does not incur a charge, but if if you contribute each pay period into it, you surely will incur the cost regardless of mutual fund or ETF.
Is there no commission-free fund with Merrill that you can use instead? Ex. POMIX has ER of 0.3%, ugly but way better than what you are incurring now.
Disclaimer: I don't have an account with Merrill so defer to others who know their fee structure better.
Last edited by tenkuky on Thu Jan 11, 2018 1:33 pm, edited 1 time in total.
livesoft
Posts: 75228
Joined: Thu Mar 01, 2007 8:00 pm

Re: Automatic Investment While Avoiding Fees?

Post by livesoft »

One needs to have a certain minimum balance to qualify for free trades at Merrill Edge. So

1. Deposit enough money to get a high enough balance to get free trades.
2. Use ETFs but ONLY if they are free trades, but there is no automatic investing with ETFs at Merrill Edge that I am aware of.

-or-

1. Switch to vanguard (and vanguard.com) if you want free trades on Vanguard products and easy automatic investing.
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marklar13
Posts: 123
Joined: Wed Jul 08, 2015 11:47 am

Re: Automatic Investment While Avoiding Fees?

Post by marklar13 »

You definitely don't want to be paying that much in fees. Most brokerages have some fund family / families that you can trade mostly commission free. With fidelity you can trade iShares for free, Vanguard you can trade vanguard funds / ETFs, etc. Especially with an account made up of just a handful of index funds... you should really pay very little (or nothing) in commissions.

I would either find out which / how you can get lower cost trades at your current brokerage, or switch to another one where you'll be able to trade the funds / ETFs you want for no or low commission.
bloom2708
Posts: 8521
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Automatic Investment While Avoiding Fees?

Post by bloom2708 »

If you are interested in the Vanguard index funds, why not pick Vanguard?

You can get to Admiral shares (lower cost) and no trading fees.

Sometimes I ask dumb questions. :annoyed
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
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