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After I have my debt paid off I want to start to put monthly amounts of money into investments. I'm going to start by building a base in a wide range of stocks via an index or etf.

ETFs make sense to me with their low MER, however I don't like the idea of being spanked every month for whatever the transaction cost is at an online broker. Be it 10 or 20 dollars.

Am I right in thinking that i can put money in every month into an index mutual fund without being hit with a transaction cost? (Aside of the MER)

Or should i save up a whack of money and make one big transaction every 6 months? It sorta defeats the Dollar Cost Averaging technique though.

What do you guys think? What do you do?

Thanks!
 

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I prefer a lump sum of money because I like to buy when the market gone down for a few days straight even though a lot of people like to say that you can't time the market.

You're right in that you will most likely incurr fees each month for transactions costs.

It also depends on how much you're planning on purchasing? For example, $5 in transaction fees for $1,000 in 1 ETF is a reasonable cost of doing business. But $5, for 10 ETFS, for $1,000 total is $5 for every $100 ETF contribution. That just wouldn't make sense to do every month.

For your initial investment, I wouldn't spread it over multiple stocks or ETFs if it's a small amount of money. More diversification comes when you have more money.
 

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Some people set the rule of thumb, so that the transaction cost is less than 1%. (e.g. if the commission is $30, then the smallest amount one should buy is $3000).

I'm a little bit more frugal, so I set mine to 0.25%. But my commission is $10. I don't think it makes a big difference whether you buy every couple of weeks or every couple of months. But if you feel compelled to buy on every paycheque, then make sure to choose a low cost brokerage like Questrade. (about $5 per trade)

One alternative I have considered, is to dollar cost average on TD e-series mutual funds, which has no commission on purchase. Then switch it out to lower cost ETF's once a year.
 

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canadiancouchpotato.com has a short article up on Slacker's suggestion (e-series to dollar cost average and then 1x per year to ETFs). Unless you are going to invest in some ETFs that do not have e-series equivalents, not sure there will be any savings if your portfolio is small.
 

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