Let's say i want to invest in some index funds, and i know which ones to go for. Let's say i can also make the initial required minimum investment. My question is, will an automatic investment plan involve fees on a monthly basis? If so, does this depend on which index i invest in? Or does it depend more on which brokerage i go for?

I tried to google this. While automatic investment plan is fairly common, i want to know more about how much fees i will be charged.

Thanks for your advice.

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    Which country are you asking about? In the US, mutual funds are glad to set up automatic investment plans where the fund withdraws the specified money from the customer's account each month or each quarter on the specified day of the month and invests the money into the fund. If the (index) fund is a no-load fund, the fund charges no fees for this service and neither does your bank, and of course, no brokerage fees are involved. If you do the same transaction through your brokerage account, then you pay whatever fees your brokerage charges. – Dilip Sarwate Jul 11 '15 at 3:21
  • Thanks Dilip, i am in the US. Are you saying we can invest in a no-load index fund without a brokerage account? What if i want to invest in multiple no-load index funds? – K_U Jul 11 '15 at 4:05
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    If the mutual funds are in the same family (e.g. Vanguard), then just set up an account directly on the Vanguard web site. After doing the on-line paperwork, you will need to send a couple of documents (signed by your bank manager etc) by US Mail which will entitle Vanguard to withdraw money from your bank account and invest as you direct them. Also any money sent to you by Vanguard (distributions taken as cash, withdrawals etc will be sent to this bank account) The standard minimum investment ($3K, $5K etc) in a fund is often reduced if you sign up for an automatic investment program. Etc. – Dilip Sarwate Jul 11 '15 at 4:20

It depends on the funds you invest in.

Load funds (those that charge a fee to invest) will charge that fee on each monthly investment. Some load funds may have special share classes that have reduced fees. You will have to research the fund (via its prospectus or a trusted financial advisor) to determine if you qualify to use such a share class.

Some funds (and some share classes) charge smaller fees when you invest, but may include a contingent fee that will be paid when you sell. They're contingent upon the time period you own them. After some period of time, the fee is usually removed. Again, read the prospectus.

No-load funds do not charge a fee to invest, and so they would be a good place to look, especially for index funds.

Most brokerages do not charge an additional fee to invest in mutual funds. They are paid a commission by the fund, through the sales fee and annual expense charges of the funds.

If you're investing in index ETFs or closed-end funds (which trade on exchanges), there is likely a commission to be paid for each monthly investment. Your specific brokerage may have a special arrangement for recurring monthly investing. You'll need to research that with your brokerage.

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