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I am currently using Ameritrade Izone (converted from my old freetrade account). Their reps tell me they can automatically ACH and deposit an amount every month, but they cannot automatically invest the cash into a selected group of ETFs. I would like my investment plan to be to set it and forget it.

Does anyone know of an on-line brokerage that would allow me to do this (while still keeping commissions reasonable)? My sense is that major mutual fund families allow you to do this but I wanted to take advantage of tax-loss harvesting with ETFs.


Any and all comments are welcome.

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Sharebuilder will allow you to set an automatic investment plan that suits your needs. They will charge you only $4 per investment. However, if you try to sell it can become expensive.

It doesn't make sense to Dollar Cost Average on a monthly basis into an ETF, you're better off going with mutual funds that are similar to the ETFs you want. It is possible to tax loss harvest with mutual funds.

Try FOLIOfn.
They charge $19.95/month and will allow you up to 200 "window" transactions/month.
They will pull funds, via ACH, from your designated checking account. All it takes is a phone call from you to effect the transfer. If you have a Cap One HYS account, you can push whatever amount you want to your brokerage account.
You can can set up you own portfolio of ETF and dollar cost average each month. You can also buy fractionalal shares. If you wish, dividends will be automatically reinvested for you.
They also give you some nice tools to monitor your performance, do tax lot accounting for you, and help you track cost basis of your portfolio.

The only "gotcha" is that for $19.95/month, they do "window" trades at either 11AM or 2 PM each day.
They also have market trades with stop limit orders if you wish, but the pricing is somewhat different.
Here is a summary of their pricing.

I can't offer any comment on th efficiency of theit market trades, since I'm using their window trades exclusively.

Thanks for all the replies so far. I will check out Sharebuilder and FolioFN. As for DCAing into ETFs, I get your point fyelow. Depending on the size of the investement, expense ratio difference and the holding period you will eventually recover the $5 to $10 commission, but I agree that mutual funds where the purchase is commission free probably make sense for most. My plan is to hold over long periods of time with periodic rebalancing. Quick follow up questions on the tax loss harvesting:

1. I thought that mutual funds did not keep tax lots, so you could not decide to sell shares with the highest basis. Is that not correct?

2. If you are with a mutual fund family, how easy is it to sell one type of fund and buy another similar enough to keep you invested but different enough not to trigger wash-sale rules?

I am a novice in regards to ETFs. What is the difference between ETFs and Mutual Funds? What are the risks involved in buying ETFs?

Thank you.

ETF Education

AGLP2K said: [Q]I am a novice in regards to ETFs. What is the difference between ETFs and Mutual Funds? What are the risks involved in buying ETFs?

Thank you.

Wellstrade might be something to look into if your total balance in all Wells Fargo accounts (except for Wells Advantage Fund accounts) is $250k or more and you intend to have only 50 trades or less per year. You get 50 free trades a year if you link all your Wells Fargo accounts with their PMA account and your total balance is over $250k. For total balances between $100k - $249,999, the first 50 trades are $2.95. Anything over 50 trades is $9.95 per trade up to 1000 shares. For total balances less than $100k, stock trade commisions are $9.95 per trade. PMA accounts are intended for balances over $25k to avoid fees.

Here's a link for more info: PMA

There are a couple of other threads here that discusses the Wells Fargo PMA accounts.

Wells Fargo PMA: lower-cost stock trades
Best online broker for active traders


I use etrade and a DRIP account to automatically invest my dividens back into the ETF. While this isn't the same thing you are asking I would assume that they could do that. They do not charge me extra for a DRIP account.


rdiazgranados said: [Q]I am currently using Ameritrade Izone (converted from my old freetrade account). Their reps tell me they can automatically ACH and deposit an amount every month, but they cannot automatically invest the cash into a selected group of ETFs. I would like my investment plan to be to set it and forget it.

Does anyone know of an on-line brokerage that would allow me to do this (while still keeping commissions reasonable)? My sense is that major mutual fund families allow you to do this but I wanted to take advantage of tax-loss harvesting with ETFs.


Any and all comments are welcome.

I suggest staying with izone and investing quarterly into the etfs. It will reduce your trading costs and you returns will do fine or...
go to interactivebrokers.com and you pay 1.00 per 100 shares. You will have to do your own buying every month and you need about 5 days to clear the ach to trade the money but the costs are very low. (10.00 data feed charge) unless you make min comission basis.

Good luck
Rob

I used to use drips and such but overall I think etfs are the way to go. There are several divident etfs out there that pay 3% or more. This way you get a nice basket of stocks and a few points during the year..

NASDAQ is attempting to make it easier to dollar-cost average into its ETFs; see this story, for example.

I strongly suggest you reconsider traditional mutual funds. The cheapest index funds cost very, very little more than ETFs; the complete absence of transaction costs will make them preferable unless your turnover is very, very low. Vanguard mutual fund shares can be converted to the ETF class (though not back) if you eventually accumulate enough to make it worthwhile.

rdiazgranados said: [Q]1. I thought that mutual funds did not keep tax lots, so you could not decide to sell shares with the highest basis. Is that not correct?That is not correct (in the way I assume you mean it). You can track specific lots when you sell, just as with other stocks; it's just that you also have the option of using average cost. It's up to your broker or other intermediary to comply with the requirements, though; many mutual fund families do not. I know it is not difficult at Fidelity.[Q]2. If you are with a mutual fund family, how easy is it to sell one type of fund and buy another similar enough to keep you invested but different enough not to trigger wash-sale rules?It might be hard within a single fund family, but it's easy if you are willing to go to another. You might consider replacing a fund with a combination of others -- for example, replacing a total stock market fund with the combination of a large-cap and a small-cap fund.

I am wondering how you managed to sell specific lots with freetrade/izone given their totally automated, "no contact outside e-mail" policy.

Again, thanks for all of the advice. LH2004, you make a good point about the mutual fund families. I know that Fidelity has cut their expense ratios on 5 of their ETFs to 10 basis points and Vanguard typically has very low costs overall ... even if they are at 18bp on some of their ETFs <img src="i/expressions/face-icon-small-smile.gif" border=0>

The idea of foliofn sounds appealing if you really want to slice and dice the market (I'm still a bit away from WellsFargo's PMA) but for a set of core holdings, I may end up deciding for Fidelity or Vanguard. Now if only DFA became available to individuals without needing to go through an advisor ..

OLEOLEOLEO, I haven't sold anything in izone yet, but I would assume you can do a "versus trade" to pick a specific tax lot.

Has anyone exprience with Amerivest and ETFs - looks like a low cost model [buying wise] with only $350 /year for $100K portoflio - they however only allow exclusively Barclay's iShares.

Any thoughts or experience?

Thanks

OLEOLEOLEO said: [Q]I am wondering how you managed to sell specific lots with freetrade/izone given their totally automated, "no contact outside e-mail" policy.

is this a joke? When you sell a lot, you don't have to deal with the brokerage firm itself. The brokerage does not report to the IRS which lot that you sold...that would be prohibitively expensive and rather useless.

All they do is tell the IRS the total of all of your sales at the end of the year, and its up to you (and your tax advisor) to report on your Schedule D the basis of your shares.

For example, E*Trade has a portfolio function, where you can "sell" a certain lot out of your holdings. It will track that as your basis and store it in your gains/losses page. But all of that is only for your own reference. E*Trade holds your stock in a pool, and its not like they are selling the specific shares that you acquired at $10 1 month ago instead of the ones you bought at $8 two years ago..

If you don't identify which shares to sell, it is assumed first in - first out order. The IRS has a specific procedure to identify these shares.

All the rules are explained very well here:

http://fairmark.com/capgain/ident.htm

And a guide specifically for Mutual Funds:

http://fairmark.com/mutual/selling.htm

bassmanben said: [Q]OLEOLEOLEO said: [Q]I am wondering how you managed to sell specific lots with freetrade/izone given their totally automated, "no contact outside e-mail" policy.

is this a joke? When you sell a lot, you don't have to deal with the brokerage firm itself. The brokerage does not report to the IRS which lot that you sold...that would be prohibitively expensive and rather useless.According to articles I've read, and the one given:
At the time of the transfer, specify to the broker the shares you are selling, and
Within a reasonable time thereafter, receive a written confirmation of that specification from your broker.

Both would be pretty hard to do not having to "deal with the brokerage firm itself".

bassmanben said: [Q]
For example, E*Trade has a portfolio function, where you can "sell" a certain lot out of your holdings. It will track that as your basis and store it in your gains/losses page. But all of that is only for your own reference. E*Trade holds your stock in a pool, and its not like they are selling the specific shares that you acquired at $10 1 month ago instead of the ones you bought at $8 two years ago..

I am not sure that this feature is completely superfluous from the point of view of the IRS. I have never been audited, but my understanding is that if you use specific lot accounting you need to be able to prove that you identified the specific lots to the broker at the time of the sale. While it has no effect on how the broker handles the order, it seems like the purpose is to prevent someone from waiting until the end of the year to decide what accounting method is most favorable and claiming to have sold specific lots after the fact.

As far as I can tell no similar system exists in the automated izone interface, but it may be possible to do a "versus purchase" order using their customer service e-mail or (new) phone number.



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