Is there a way to buy ETF shares on a monthly savings plan?

Buying ETFS with a small amount of cash

ETFs offer a long list of benefits, but one of their drawbacks is that they don’t make it easy to invest small amounts. That’s because almost all brokerages charge a commission to buy and sell ETFs: usually $7 to $10 per trade. If you’re contributing $200 per month, a $10 commission is 5% of every purchase. That will quickly erode any benefit you might get from the ETF’s lower management fees.

If you’re looking to invest small amounts with ETFs, you have a few options:

Use a robo-advisor. There are now many online platforms that allow you to build an ETF portfolio with small amounts of money and regular contributions, including Wealthsimple and Modern Advisor. Every time you add money, it’s used to buy new shares, and you’re not charged any trading commissions: instead, you pay a small percentage of your account (usually 0.50% annually) or a flat monthly fee. This makes it cost-efficient for investors adding small amounts each month.

Use a brokerage with commission-free ETFs. Several online brokerages, including Questrade, WealthSimple and Virtual Brokers, allow you to purchase ETFs with no commission. Others such as Scotia iTRADE and Qtrade have a limited menu of commission-free ETFs. You still have to place each trade manually, but you can contribute cash to your account automatically and then buy a few shares at a time without paying commissions.

Open a Wealthsimple Trade account*
Go to Site

Use the iShares PACC plan. At most brokerages, iShares ETFs are eligible for a pre-authorized purchase plan, or PACC. First you arrange to contribute a fixed dollar amount to your account each month, then you instruct the brokerage to buy a fixed dollar amount of the ETF each month with no commission. Only whole shares can be purchased, so for example, if you set up a PACC for $200 per month and the ETF is trading at $22, you’ll buy nine shares and the other $2 will remain uninvested.

If none of these options appeal to you, Peter, there’s nothing wrong with just saving up a few months’ worth of contributions before you make a trade. If you’re saving $200 per month and commissions are $10, for example, you might make just two trades of $1,200 each year. Having a few hundred dollars sit in cash for five or six months is not going to impact your long-term investment performance.

Finally, while there are some workarounds to the problem of ETF commissions, I encourage investors to consider index mutual funds if they’re making small regular contributions. The TD e-Series funds are even cheaper than robo-advisors, and they allow you to set up a systematic investment plan (SIP) for as little as little as $25 per month.

More about investing:

What does the * mean?

Affiliate (monetized) links can sometimes result in a payment to MoneySense (owned by Ratehub Inc.), which helps our website stay free to our users. If a link has an asterisk (*) or is labelled as “Featured,” it is an affiliate link. If a link is labelled as “Sponsored,” it is a paid placement, which may or may not have an affiliate link. Our editorial content will never be influenced by these links. We are committed to looking at all available products in the market. Where a product ranks in our article, and whether or not it’s included in the first place, is never driven by compensation. For more details, read our MoneySense Monetization policy.