What is the minimum amount I can invest if I want to get into a mutual fund?

Question

I have about $300 to $500 I want to start out with and I will eventually be putting in about $200 to $500 per month after that. What is my next move here? I'm a total novice so please talk down to me. Best Answer will be awarded to the answerer with the most thorough and simplified information.

THANK YOU!!!

Answer 1

If you want to invest for retirement, you can open an IRA with http://www.fidelity.com and start your fund with only $250. This is contingent upon your commitment to put in $250 per month on a regular basis.

Fidelity, like a few other firms, offers target-date retirement funds. These are fund-of-funds which invest your money in 22 underlying mutual funds. In other words, you get full diversification by using just one fund-of-funds. The manager has chosen an asset allocation that he thinks is appropriate based on your target retirement date. Then, as you move closer to that date, the manager will gradually change the fund to a more conservative mix, which is what any reasonable investor does. In addition, the manager will rebalance your assets automatically. With one fund-of-funds, you are now invested in all the world's major investable assets: domestic stocks (small and large, value and growth), investment grade bonds, high-yield bonds, and foreign stocks (both developed countries and emerging markets).

Target-date fund-of-funds are one of the simplest and cheapest way to invest for retirement. Even with my extensive knowledge of mutual fund investing, I use a target-date retirement fund for my own IRA. As I say in my book, "Simplicity usually trumps complexity, because your plan is easier to stick to." Don't confuse simplicity with inferior investing. Some of the most successful investors employ a passive, simple approach.

Fidelity's target-date funds have no loads, no 12b-1 fees, and a 0.8% annual expense ratio. Not as low as Vanguard's funds, but still much lower than the average firm's costs.

For more info on retirement investing, check out my free downloadable book at http://www.invest-for-retirement.com

Oh, and a bit of advice. Past returns and Morningstar ratings are about as useful as reading tea leaves for picking successful funds. Time and time again, academic research has shown that "the first shall be the last". The best-performing funds of one time period (4 and 5 Star ratings by Morningstar) invariably become the mediocre or poor-performing funds of the next time period. Many of the current hot-performing funds were last decade's stinkers. Case in point: the Fidelity Magellan fund was once heralded as the best-forming mutual fund of all times, posting a 15-year track record that could not be touched. The Magellan fund then proceeded to underperform the market for the next 15 years and is now the second worst Large-cap fund in Fidelity's lineup. The first shall truly be the last.

Reversion-to-the-mean is an inescapable force. Chasing past performance is a one-way ticket to underperforming the broad market. Instead of past performance, a much better selection criteria for mutual funds is COSTS. I cannot stress this enough: Morningstar ratings are absolutely useless!!! Pick your funds based on the assets the hold and the costs they charge.

"The ability to ignore current market conditions is one of an investor's greatest weapons." - William Bernstein, The Intellifent Asset Allocator

Answer 2

The person below who recommended UMBIX, from Excelsior makes a good recommendation. It is a 5 star morningstar.com rated fund, very good.

So you can start there. But since you are putting $200 to $500 a month after that, I recommend using a brokerage firm such as E*Trade (http://www.etrade.com). The advantage of this is that you are not required to buy mutual funds only from one company (such as Excelsior). You can choose from many funds. With E*Trade, there are over 7000 funds:
https://us.etrade.com/e/t/investingandtrading/mutualfundsandetfs?fundfamily=0&fund_fee_code=0

What you can do with this is choose 4 or 5 star morningstar rated fund that has no load and no transaction fee (cheap to enter!). Also, there are many different mutual funds, and some mutual funds have a minimum of $1000, some with a minimum of $100.

You can easily set up automatic investing too so it automatically gets invested in the funds every month without you doing anything about it.

eventually, you can have a diversified portfolio of three types of mutual funds:
1. US Large Company
2. US Small Company
3. Diversified International.

Initially, choose one type of mutual fund and continue to accumulate. After you have more money, you can get the second fund, then the third. Add $100 to each fund in equal amounts.

Minimum to open E*Trade account is $1000.

What I recommend is this. At first, Open an E*Trade Complete Savings account:
https://us.etrade.com/e/t/welcome/completesavings
You get 5.05%. When you have $1000, you can then open an E*Trade brokerage account and link your two accounts. Then you can start investing one mutual fund at a time at regular intervals.

Answer 3

Because you have so little to be investing (and i commend you on getting starting) you want to avoid investing costs wherever and whenever possible.
To do this, I would do some research, there are some good funds that allow minimum initial investments as low as 250.00. Try fool.com and smartmoney.com for additional sources and screening tools.
If you buy the fund through the company, you wont have to pay a fee each time you buy (whereas with scottrade for example, you would).
You would do best with a multi cap or large cap fund. Not small, micro cap, or natural resources. You want to capture the overall market for right now and diversify with more specific sectors later.

Another option are ETFs, but because you seem to be doing monthly investments, these will not be cost effective for you.

Answer 4

Long ago I wanted to start investing. I had $1000. I saw an ad in the newspaper that a certain bank would take a minimum investment of $1k so I made an appointment and went in. Here was a guy in a cheap suit sitting in a bank in an upscale neighborhood talking down to me about how all of his investers had at least $10k to invest. I mentioned the ad and he just didn't want to be bothered. I just had to ask him how good could he be to have all these great customers and he couldn't afford a decent suit (and his shoes weren't shined). I went to several banks that had the same services. I finally found someone that seemed to know her business and that I would trust with my money. All of this to say-look them over carefully. There are some real idiots out there. Best advice: go to the library and start reading. You want to know everything you can because it is still your money and your responsibility to handle. You will need to check your investments and be sure you are invested as you want. Many advisors put you into things they want to sell which may or may not be in your best interest. Read. Read. Read.

Answer 5

Yahoo Finance has a mutual fund screener that allows you to list funds meeting various criteria including: no-load funds, minimum purchase price less than $500.

One broadly diversified fund that meets that (and other) criteria is "Schwab Total Stock Market Index Inv" (SWTIX). It has a minimum initial purchase amount of $100. The annualized returns for this broadly diversified fund are: 1 yr=22.13%, 3 yr=13.79%/yr, and 5 yr=10.34%/yr.

Start your search at Morningstar, Yahoo Finance, or Schwab. Vanguard has some excellent funds, but the minimum investment is $3000. If you can accumulate your $400 initial investment and then 8 months at $350 you will have $3,200 and many excellent no-load funds are then available.

Answer 6

vanguard is a very good company. A good starter fund is their Star Fund which has a minimum initial investment of $ 1000. Subsequent investment are $100. This fund is well diversified. I would save up until I had the minimum. Both my daughters are in this fund.

Answer 7

You can open a brokerage account with Scottrade for $500.
You may want to take a look at ETF's (Exchange Traded Funds) which are similar to Mutual Funds but have generally lower expenses and can be traded like stocks, many of which also pay dividends.

Answer 8

Besides the low minimums mentioned by others, T. Rowe Price fund family will allow you to invest a minimum of $50 if you agree to have at least that amount electronically taken out of your checking account each and every month until you reach their usual $2500 minimum. Go to
www.troweprice.com for more information.

Answer 9

now not so much danger in a mutual fund. appear into forefront. they've an quality choice of budget to prefer from. i'm 27 and plan to retire in or round 2045. they've a fund so that it will make investments your cash accurately every 12 months, beginning out agressively within the commencing and fitting extra conservative as you begin to close retirement.

Answer 10

Excelsior funds have a $500 minimum. Their Value and Restructuring fund (UMBIX) has beaten the S&P500 nearly every year in it's inception.
You can open an account by mail. They are good people to work with.