Today’s Getting Going column by Jonathan Clements is titled Start Small, Think Big: How to Launch Your Financial Life With Just a Few Bucks (free). For those just starting out, with little money to invest, Clements recommends:
1. Buying exchange-traded funds through places like
ShareBuilder.com, BuyandHold, and FOLIOfn. I have worked with both Sharebuilder and FOLIOfn in the past and found them both to be pretty good alternatives. Sharebuilder only charges $4 per trade. The downside is that it isn’t the most flexible because they only trade on Tuesdays unless you opt for the real time trades which are significantly more expensive.
2. DRIP Investing, which is buying stocks directly from the company. Be careful though because lots of companies have started charging various fees that can eat into your returns. Also, since you are investing in companies directly, I can see this becoming an administrative nightmare.
3. Investing in low-cost mutual funds that have low initial investments. Clements likes the Lifecycle Funds from AARP and T. Rowe Price. You can get started with AARP with as little as $100, while T. Rowe Price will allow you to start with as little as $50 as long as you agree to invest at least $50 through their automatic investment plan.
Anyway, read Jonathan’s article. He almost always has something worthwhile to say.