I originally published this article in 2009, but have since updated it with more relevant information. Since the last article on discount brokers that offer commission free ETFs, new investor readers have been requesting more information on investing small amounts per month.

When people get their finances in order and decide to invest, it’s common to see only small amounts allocated per month for investing.  Another situation where this happens is if people are just starting the Smith Manoeuvre with just over 20% equity in their home.  In this case, the credit limit on the HELOC only increases by a couple hundred every month which is then available to invest with.

However, investing small amounts at a time can be quite expensive due to fees from discount brokerages on every transaction.  If you are in this situation, there are a few ways that you can reduce the trading costs.

  1. Find a Low Cost Brokerage. If you’re set on buying stocks with your savings, then it’s probably in your best interest to find a lower cost discount brokerage.  In Canada, the cost to trade can range from $4.95/trade to $29.99/trade depending on the brokerage.  Here is my summary of some of the discount brokerages offered in Canada.
  2. Commission Free ETFs.  As an extension to using a low cost brokerage, if you are considering an index investing strategy with a low cost portfolio, going with a discount broker that offers commission free ETFs will save a bundle on regular trading commission fees.  When evaluating a discount broker, make sure to look at other features like USD registered accounts, no annual fees, and low trading commissions.  Here is my list of the top discount brokers that offer commission free ETFs
  3. Accumulate Cash. If you have a small amount to invest with every month, why not accumulate the cash so that you can make a larger purchase.  This would help reduce transactions which in turn reduces trading costs.  For me, I use the 1% trading rule.  That is, the purchase commission should never be more than 1% of the total transaction cost.
  4. SPP/DRIP.  Another strategy for smaller sums of money is to join the Stock Purchase Plan (SPP) or Dividend Re-Investment Plan (DRIP) of companies that you like (if they offer them).  If the company offers SPP, you can purchase small quantities of stock on a regular basis with little or no transaction fees.  Most of the blue chip dividend payers in Canada offer a SPP/DRIP plan.
  5. Invest in low cost mutual funds instead.  Before commission free ETFs were offered, the go to choice for investing small amounts per month was to use low cost mutual funds.  While still a decent choice (we still have our RESPs with index mutual funds), mutual funds also allow small amounts to be invested on a periodic basis with no extra fees (besides their MER).  They can also provide much greater diversification than purchasing small amounts of a single stock.  If you’re looking for a place to start your mutual fund research, the TD e-Series is a good bet.

Do you have any other suggestions for reducing trading costs?


  1. Chad @ Sentient Money on March 11, 2009 at 8:10 am

    All good suggestions and I definitely use the 1% rule. Actually, I try to go lower than that, but I never go above 1%.

  2. Thomas on March 11, 2009 at 8:37 am

    Depending on your credit, you could get a line of credit with a bank, use the money to invest, and pay off the LOC instead of making your biweekly paycheque investments. For example, borrow 3 months worth of investment capital at a time, pay off the debt for three months, then borrow again. This looks a lot like strategy 2 above, but you get the moeny working for you sooner. And the interest might be tax-deductible (if the investments were for the purpose of generating income and were in a non-registered account)

  3. FrugalTrader on March 11, 2009 at 9:14 am

    Thomas, great idea. Very similar to The Rempel’s Maximum strategy.

  4. Dividend Growth Investor on March 11, 2009 at 9:25 am

    As usual the lower the costs the better. Tha’t’s one thing in investor performance that helps no matter what.

  5. Ray on March 11, 2009 at 10:21 am

    That is funny because I posted about dollar cost average today.
    Thomas strategy is pretty much DCA maybe a little more tax efficient, what I like about it is that it forces someone to save because it is now a bill you HAVE to pay now.

  6. Kathryn on March 11, 2009 at 10:42 am

    I’m all about dollar cost averaging and low cost mutual funds.

    Every month
    The day after pay-day

    We don’t even notice it’s gone but it’s amazing how it grows over the years.

  7. CanadianFinance on March 11, 2009 at 11:35 am

    My current place is getting listed this week. Once I move into a new house I will start a Smith Manoeuvre. Since I’ll probably have just past the 20% down I will definitely be using Questrade and making sure I have at least $500 per purchase.

  8. wx_junkie on March 11, 2009 at 11:52 am

    As I mentioned over in the discount brokerage forum, if you sign up with CIBC Edge Advantage, pay the $395 fee out of pocket (and write it off as investment expense, thereby getting back almost half of it back depending on marginal tax rate), then you can trade for 0% commission!

    And if you use up your 50 free trades (a BIG if that is, I won’t and I suspect many who are just starting the SM with only 20% down won’t either), $6.95 per trade still is hard to beat (purchase would have to be only $695 to get below the 1% rule).

    Of course, this is sort of bending the truth, in that you’ve really paid for 50 transactions up front. But in my case, with 40% tax rate, I get back $158 of it, so in essence I only paid $237. If u were able to make a full 50 trades that year, that works out to $4.74 per trade. Even if you only made 1 purchase per month, you would only be paying $19.75 per buy (after your income tax refund is accounted for). But I like my way of looking at it better.. it softens the blow!

  9. Thomas on March 11, 2009 at 12:57 pm

    Funny- I don’t DCA, so I might be making a mistake about this, but isn’t my idea kinda the opposite of DCA? You (unfortunately) have a lot more volatility using my idea than you would investing a portion of every paychque. But the fees are low.

  10. Ze French on March 11, 2009 at 1:08 pm

    CIBC Index funds available through PC Financial have an MER of around 1%, allow regular contributions alow as $25 and PC will give you back 10 basis points (or 0.10%) of the trailing fee.

    It’s a good option if you want to start building your first portfolio with DCA and diversification. You can build a lazy porfolio with 3 indexes (bonds, CAD equity and US equity) with only $75 per deposit. In addition, they offer rebalancing and the annual management is $24.

    The MER is more than with TD e-series but I believe that the regular contribution with TD is $100 per fund.

  11. Ray on March 11, 2009 at 1:10 pm

    Thomas, yea are right it is not exactly DCA. but I see it as sort of a combo plan. What I like about your strategy is that you are forced to be disciplined, and thats usually the biggest problem with DCA people are just not disciplined enough.

    I had couple of clients who were not able to stick with DCA plan so what we did is do a lumpsum into a money market fund and than buy monthly from money market fund and pay off the loan in the meantime, it work pretty good with them.

  12. Matt on March 11, 2009 at 2:33 pm

    Thomas – the line of credit is a good suggestion but I would be wary of interest rates. PC Financial just raised my personal LOC 1%. When I phoned to voice my displeasure the response was “Well everyone else (ie. banks) is doing it.” I haven’t heard that rationale since grade school (and no, I do not have children yet). I must say I am quite disgusted by these actions by banks. They are still posting profits despite the hard economic times and despite the lowering of lending rates between banks (leading to lower prime for consumers) they are still sticking it to the average person. My faith in humanity index is now in negative terrority – much like my portfolio :D At least it is in good company.

  13. Novice on March 11, 2009 at 3:51 pm

    @ 10 — if you use a PAP (preauth payment) you can make regular contributions at $25 for TD efunds for most (all?) efunds. Now what they should do is give you $50 for jumping through all the hoops to get one setup!

  14. tj on March 12, 2009 at 12:51 pm

    It’s not hard at all setting up direct withdrawl with TD efunds. I can go into my account right now and set one up in 5mins. Not sure what Novice is talking about?

  15. Joe on March 13, 2009 at 4:09 pm

    It seems that CIBC $395 commission fee can not be claimed as a carrying charges. I am with CIBC too, see the following from CRA website.
    Carrying charges and interest expenses
    You cannot deduct on line 221 any of the following amounts:

    * The interest you paid on money you borrowed to contribute to a registered retirement savings plan or a registered education savings plan, or a registered disability savings plan.
    * The interest part of your student loan repayments (although you may be able to claim a credit on line 319 on Schedule 1 for this amount).
    * Subscription fees paid for financial newspapers or magazines, or newsletters.
    * Brokerage fees or commissions you paid when you bought or sold securities. Instead, you use these costs when you calculate your capital gain or capital loss. For more information, see Capital Gains.

  16. wx_junkie on March 17, 2009 at 10:00 am


    I read that same excerpt a while back, and I still stand by my interpretation.

    I think the 4th bullet is the one in question.

    Technically, i did NOT pay this fee when I bought or sold securities, but at the beginning of the year, and it was charged to me regardless of whether I was gong to buy/sell or not.

    Also, on the transaction statement that CIBC sends out, nowhere on it does it show the commission paid, as it usually does when you are paying commission on a transaction by transaction basis. So if my transaction statements say I paid no commission for 50 trades (the same statements I’d use in event of a CRA audit), there should be nothing to dispute.

  17. wx_junkie on March 17, 2009 at 10:20 am


    I read that same excerpt a while back, and I still stand by my interpretation.

    I think the 4th bullet is the one in question:

    Technically, i did NOT pay this fee when I bought or sold securities, but at the beginning of the year, and it was charged to me regardless of whether I was gong to buy/sell or not.

    Also, on the transaction statement that CIBC sends out, nowhere on it does it show the commission paid, as it usually does when you are paying commission on a transaction by transaction basis. So if my transaction statements say I paid no commission for 50 trades (the same statements I’d use in event of a CRA audit), there should be nothing to dispute.

  18. The Dividend Guy on August 27, 2013 at 8:46 am

    I also use a the 1% rule. If your trading commission is higher, you might as well buy a mutual fund!

    When I have free money on the side, I put it in a US index ETF until I have enough to buy another dividend stock.

  19. Some Guy on August 27, 2013 at 9:25 am

    Get your hands on a single share which offers DRIP/SPP. Once you have that, you should be able to make most of your transactions on that stock without fees.

  20. fiscally fit on August 27, 2013 at 2:43 pm


    Great strategy indeed. The one main point people need to be clear on is tainting their line of credit. Many people do not understand this concept when borrwoing to invest and making their interest tax deductible. The definitely need to touch with a tax professional to ensure they understand the concept completely. CRA is a fickle animal when it comes to ignorance haha

  21. My Own Advisor on August 30, 2013 at 8:46 pm

    Love DRIPs, I run them for over half of my portfolio. I don’t bother with full DRIPs anymore, just synthetic ones with the brokerage.

    I also use the 1% trading rule. I don’t typically buy anything until I have at least $1000 to invest. I do break this rule now and then though, since I want to see money making money sooner than later.

    Good post FT!

  22. Dividend Tactics on September 1, 2013 at 7:06 pm

    I never actually heard of the term 1% rule until now. What I always do when I buy dividend stocks is to try to buy enough such that the first dividend that the investment would pay me would equal or exceed what I paid in commissions.

    Anyhow, nice article

  23. Danielle on September 2, 2013 at 1:52 am

    @my own advisor can you explain the synthetic drips you were referring to?

  24. jay on September 3, 2013 at 7:30 pm

    On the no fee etf trading ,you pay on a wider spread ,so you are really paying more….just want to give you a heads up:)

  25. Jack @ Enwealthen on September 11, 2013 at 1:13 am

    Definitely down with the DRIP strategy. I spent a lot of time looking for some low cost alternatives when my nephew asked me about getting started investing with small amounts of money, and had a hard time coming up with something approachable for a college student.

    Ultimately settled on 3M’s DRIP, but was surprised at the high minimum investments, fees, etc. for the more popular DRIP plans.

  26. Deejey on September 19, 2013 at 2:55 pm

    VB allows buying ETFs for free. I don’t have much savings/investments and am planning to add to my investments monthly. Buying ETFs for free is a great advantage for me because I want the benefits of diversification (to some extent) and also no commission on ETF purchases. I’m thinking of selling my ETFs when each one of them is large enough to be sold to for a low per share cost.

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