Start Investing with Only $100?

January 24, 2006

Richard Jenkins over at MS Money thinks people can Start Investing With Just $100. He suggests starting out by buying the Vanguard Total Market Viper (VTI). He also says that the only brokerage he found with no minimums and relatively low fees is
ShareBuilder.com.

Their cheapest plan allows for $4 trades but they ARE NOT real time trades. These trades take place on Tuesdays and you do not get to pick the price they buy at, which means you probably aren’t getting the best price. However, with a relatively small amount to invest, it probably doesn’t make much difference.

Your first $100 is only the beginning. Your next goal should be to save up additional amounts to invest. The best solution is to get on some sort of automatic investment program (Sharebuilder can set something up for you) and invest a regular amount once a month or quarter. As Richard suggests, you could even spread your investments around to build a diversified portfolio.

Keep in mind that Sharebuilder isn’t a good long-term solution. Once you build up an account of $2,500 – $5,000, you can avoid those $4 commissions by moving to Vanguard and investing in index mutual funds, which do not have commissions.

The other thing you can do is simply save your money until you have at least $2,500 and then go the mutual fund route. However, there is something about investing that empowers you to invest more and could be just the thing to get you on the road to building wealth.

8 responses to Start Investing with Only $100?

  1. Wow. All this time I didnt realize that sharebuilder only traded once a week. Interesting. I can see it’s use for a low barrier to entry, dollar-cost averaging solution (like this) but I’ll concentrate on getting my fidelity account to the better commission level.

  2. Caitlin,

    Just so you understand, you can do real-time trades with Sharebuilder, but they charge $15.95 per trade.

  3. I finally opened a Sharebuilder account for two reasons: 1) I have been wanting to build up a portfolio of high-dividend stocks, and 2) an $85 bonus from Costco for opening such an account.

    #1 wasn’t high on my priority list right now, but I know if I keep putting it off it won’t happen for a while. I wholeheartedly agree with your point that it isn’t best suited for the long term. I’m hoping by the time I get my higher priorities addressed and I’m ready to invest more, I’ll have built up a substantial position without even having noticed it happening.

  4. I was wondering, and I know that I am new to investing, but if you invest 100 dollars for 12 months, that is a total of 12 trades and 1200 dollars. Now, that is going to cost you 12 x 4 = 48 bucks. So, you have paid 4 percent of your money, just to purchase the stocks or etf’s. Wouldn’t the stocks have to grow at LEAST 4 percent to break even, and ANOTHER 4 percent to match an ING type rate of return. Am I missing something? Why not SAVE up the 1200 dollars, and make a single annual purchase, for 4 bucks, or .33 percent. (plus, you would make 4 percent on your savings at ing or emigrant, etc.) Wouldn’t a stock or etf have to do BETTER than 8 percent, in order for you to make money this way? Thanks,
    ncnblog.com

  5. NCNblog is right — the beauty of Sharebuilder is that you can make your transaction costs very low, if you are willing to wait to invest a larger amount. But you are assuming that something like INGdirect is going to pay 4% for the next 10 years. Also, the weekly trades aren’t really a big deal — do you really need a real-time gotta-have-it-right-now trade if you are going to hold your investment for 5-10 years? You’d better be holding it that long if you hope to make any money (and mitigate the transaction costs).

  6. Just get an excelsior fund after you save $500 (their minimum). Save via one of these funds till you get in excess of $2000 then shop around again.

    The Excelsior fund expense ratios are reasonable and are much less than the 4% quoted above. You can buy into these funds free of charge via most brokerage accounts.

    Enjoy!

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