Have you been thinking about a safe, liquid place to park your cash that still earns a competitive return? Money market funds might be exactly what you're looking for! ETRADE, a popular online brokerage, offers a variety of these funds, providing a solid alternative to traditional savings accounts. This comprehensive guide will walk you through the process of buying money market funds on ETRADE, step by step, ensuring you feel confident in your investment journey.
Let's dive in!
Buying Money Market Funds on E*TRADE: Your Step-by-Step Guide
Money market funds are a type of mutual fund that invests in highly liquid, short-term debt instruments like U.S. Treasury bills, commercial paper, and certificates of deposit. They are generally considered low-risk investments, aiming to maintain a stable net asset value (typically $1.00 per share) while providing a modest yield. This makes them ideal for short-term savings, emergency funds, or as a holding pen for cash while you await other investment opportunities.
 |
| How To Buy Money Market Funds On Etrade |
Step 1: Do You Have an E*TRADE Account? Let's Find Out!
Before you can invest in money market funds on E*TRADE, you'll need an active brokerage account.
Already have one? Fantastic! You can skip ahead to Step 2.
New to ETRADE?* No problem at all! Opening an account is a straightforward process. You'll generally need to provide personal information such as your Social Security number, employment details, and financial information.
Sub-heading: How to Open an E*TRADE Account
Visit the E*TRADE Website: Go to the official E*TRADE website (etrade.com).
Click "Open an Account": You'll typically find a prominent button or link for opening a new account.
Choose Your Account Type: For most individual investors, a "Brokerage Account" is the most suitable choice as it allows you to buy and sell various investments, including mutual funds. E*TRADE also offers retirement accounts like IRAs (Traditional, Roth, Rollover), which are excellent for long-term savings and may also hold money market funds.
Complete the Application: Fill out the online application form with your personal details, financial information, and investment goals. Be prepared to provide your Social Security Number, employer details, and possibly bank account information for funding.
Fund Your Account: Once your account is approved, you'll need to deposit money. E*TRADE offers several funding methods, including electronic funds transfer (ACH), wire transfers, or mailing a check. Electronic transfers are usually the quickest.
Step 2: Navigate to the Mutual Funds Section
Once you've logged into your E*TRADE account, you'll need to locate the section dedicated to mutual funds.
Sub-heading: Finding Mutual Funds on the E*TRADE Platform
Log In: Enter your User ID and Password on the E*TRADE login page.
Locate "Investments" or "Trading": On the main dashboard or navigation menu, look for tabs or links that say "Investments," "Trading," or "Products."
Select "Mutual Funds": Within the investment or trading section, you should find a specific option for "Mutual Funds." Click on this to proceed.
QuickTip: Look for repeated words — they signal importance.
Step 3: Utilize the Money Market Fund Screener
E*TRADE, like most reputable brokers, offers powerful screening tools to help you find the right investments. This is where you'll filter for money market funds.
Sub-heading: Filtering for Money Market Funds
Access the Fund Screener: Once you're in the Mutual Funds section, look for a "Screener" or "Research" tool.
Specify Fund Type: Within the screener, you'll likely see options to filter by fund type. Select "Money Market" or a similar category.
Consider Additional Filters (Optional but Recommended):
No-Transaction-Fee (NTF) Funds: Many money market funds on E*TRADE are NTF, meaning you won't pay a commission to buy or sell them. This is often a key consideration for maximizing your returns.
Expense Ratio: This is the annual fee charged as a percentage of your investment. Lower expense ratios are generally better, as they mean more of your money is working for you.
Yield: While money market funds are not about high returns, you'll want to compare the 7-day SEC yield to find funds offering a competitive interest rate.
Investment Focus: Some money market funds specialize in government securities (like Treasury bills), while others might include commercial paper. Government-only funds are typically considered the safest.
Minimum Investment: Check if the fund has a minimum initial investment or subsequent investment requirement that aligns with your available funds.
Step 4: Research and Select Your Money Market Fund
Now that you've narrowed down your options, it's time to dig deeper into the details of specific funds.
Sub-heading: Key Information to Review for Your Chosen Fund
Review the Prospectus: This document contains crucial information about the fund's investment objectives, risks, fees, and performance. Always read the prospectus before investing. E*TRADE will provide a link to it.
Check the 7-Day SEC Yield: This is a standardized measure of a money market fund's yield over the past seven days, net of expenses. It's a good indicator of current earnings.
Understand the Expense Ratio: As mentioned, this annual fee impacts your net return. A lower expense ratio is generally preferable.
Examine Holdings: While money market funds are inherently low-risk, understanding what they invest in (e.g., government securities, corporate commercial paper) can provide additional comfort.
Read Fund Descriptions and Ratings: E*TRADE often provides descriptions and potentially third-party ratings (like Morningstar) that offer insights into the fund's characteristics and historical stability.
Step 5: Place Your Trade
Once you've chosen the money market fund you want to invest in, you're ready to place the order.
 |
Sub-heading: Executing Your Money Market Fund Purchase
Click "Buy" or "Trade": On the fund's detail page, you'll find a button to initiate a purchase.
Enter Investment Amount: Specify the dollar amount you wish to invest in the money market fund. Mutual funds, unlike stocks, are typically bought in dollar amounts, not a number of shares.
Choose Your Account: Select the E*TRADE account from which you want to buy the fund.
Review Your Order: Carefully review all the details of your order, including the fund name, investment amount, and the account it's coming from.
Confirm Your Trade: Once everything looks correct, confirm the order. Money market fund trades, like other mutual funds, are typically executed once per day after the market closes, based on that day's net asset value (NAV). You won't see an immediate execution like with a stock trade.
Step 6: Monitor Your Investment
After your trade is executed, your money market fund investment will appear in your E*TRADE portfolio.
QuickTip: A careful read saves time later.
Sub-heading: Keeping Tabs on Your Money Market Fund
Check Your Portfolio: Your E*TRADE portfolio dashboard will show your new money market fund holding.
Track Performance: While money market funds aim for stability, you can still monitor their yield and ensure they are meeting your expectations.
Reinvest Dividends (Optional): Money market funds typically pay out dividends (interest earned). You can usually choose to have these dividends automatically reinvested back into the fund, compounding your earnings, or paid out as cash. Reinvestment is often a good strategy for long-term growth.
10 Related FAQ Questions
How to choose the best money market fund on E*TRADE?
The "best" fund depends on your needs. Consider funds with low expense ratios, a competitive 7-day SEC yield, and those that are No-Transaction-Fee (NTF). Government money market funds are generally considered the safest.
How to transfer money into an E*TRADE account to buy money market funds?
You can transfer money via electronic funds transfer (ACH) from a linked bank account, wire transfer, or by mailing a check. ACH transfers are usually the most common and convenient.
How to find No-Transaction-Fee (NTF) money market funds on E*TRADE?
When using the mutual fund screener on E*TRADE, look for a filter option specifically for "No-Transaction-Fee" or "NTF" funds. Selecting this will narrow down your search.
Reminder: Reading twice often makes things clearer.
How to check the current yield of a money market fund on E*TRADE?
On the fund's detail page within E*TRADE's platform, you will typically find the "7-day SEC yield" listed prominently. This provides a standardized measure of its current performance.
How to redeem money market funds on E*TRADE?
To redeem (sell) your money market fund shares, navigate to your portfolio, select the money market fund, and choose the "Sell" or "Redeem" option. Funds are typically redeemed at the current day's NAV.
How to understand the risks of money market funds?
While considered low-risk, money market funds are not FDIC insured (unlike bank savings accounts) and it is possible to lose money, though rare. They are subject to interest rate risk and credit risk of the underlying securities. The prospectus provides detailed risk information.
How to set up automatic investments into a money market fund on E*TRADE?
QuickTip: Reading regularly builds stronger recall.
E*TRADE usually allows you to set up recurring investments into mutual funds. Look for an "Automatic Investment Plan" or "Recurring Investment" option within the fund's details or your account settings.
How to find the expense ratio for a money market fund on E*TRADE?
The expense ratio is a crucial piece of information found in the fund's prospectus and also typically displayed on the fund's detail page within the E*TRADE platform.
How to contact E*TRADE customer service for money market fund questions?
You can usually reach E*TRADE customer service by phone (their general number is 800-387-2331) or through their online contact options like secure messaging.
How to choose between a taxable and tax-free money market fund?
Taxable money market funds generally offer higher yields but are subject to federal, state, and local income taxes. Tax-free (municipal) money market funds typically have lower yields but the income may be exempt from federal income tax, and sometimes state and local taxes, especially if you invest in a fund from your state of residence. This choice depends on your individual tax situation.
 |
