# "Strategy" for investing Every Penny

This is probably a stupid question, but I couldn't find an answer anywhere. I am just starting out and I have a Roth IRA account with an Online broker holding \$5500 ready to be invested. I am running into a "market order maximum" problem where I can only invest 95% of my funds in say an ETF. This would leave me with 5% sitting in my account doing nothing. As far as I can tell I would have a similar problem using a limit order where the price of an ETF might not fit evenly into the amount I have to invest.

So my question is: Are there any strategies For investing every penny in this situation without investing in a mutual fund?

• Penny stocks? Note: Not a recommendation.
– user
May 13, 2017 at 21:39
• Buy similar ETF that are "cheaper" per unit. Example IBB vs XBI. Or switch to a broker that allows odd lot buy. May 13, 2017 at 23:26

Use a limit order instead of a market order. Suppose the following:

• You have \$5,500 to invest
• You'd like to invest it all in ABC ETF which has a current market value of \$123.45

Because \$5,500/\$123.45 = 44.55 you can buy a maximum of 44 shares. If the market price doesn't change in the time that you make your order (it will change a little) then you will have invested \$5,431.80 and you'll have \$68.20 left over in cash.

Now you need to figure out the limit price for purchasing 44 shares. The max that you can pay without exceeding the amount in your account is \$5,500/44 = \$125. You can thus set a limit price anywhere between \$123.45 and \$125. The precise limit prices doesn't matter much since a high volume ETF won't change quickly. In this example, I would pick a limit price of \$124.

When you are only investing \$5,500, this will cause you to be 99% invested (100*\$5,431.80/\$5,500). While you are not investing "every penny", this is good enough for now. As years go by and your investments increase, you can easily be 99.99% invested.

Since ETFs must be purchased in whole lots, you won't be able to buy exactly \$5,500 worth of an ETF (except on the stupendously rare chance that its price is a whole number divisor of \$5,500).

To your question, though, the broker probably sets the 5% cushion in case the price rises between the time you put the order and when it is executed. After you buy as much as you can, just buy some more...