||Ask the Dollar Diva
How much money do I need to
Dear Dollar Diva,
What is the minimum amount of money needed to start investing for
financial growth? I want to invest in mutual funds or stocks, but
my funds are limited.
The Diva reminds you that saving comes before investing,
so make sure you squirrel away some money to cover emergencies first.
You want to set aside at least enough cash to cover three to six
months of living expenses before you get into the market.
Money market funds, bonds and certificates of deposit
are good places to put your emergency savings. To find out why,
read the Diva's "Where
do I stash my emergency cash?"
Most mutual funds make you cough up at least $1,000
to open an account. But don't go 'way. There's a fund-family that
will let you play for less: TIAA-CREF.
TIAA-CREF stands for Teachers Insurance and Annuity
Association and College Retirement Equities Fund. It used to serve
the education community, exclusively, but now offers affordable,
no-load, low-fee mutual funds to the public. That's good news for
the small investor.
$250 opens a mutual fund account at TIAA-CREF. And
if that's too much, they have an Automatic Investment Plan that
lets you invest as little as $25 every three months; your checking
account is automatically debited for the $25. The Diva suggests
taking a pass on the Automatic Investment Plan unless you are absolutely
certain that you will have the $25 in your account when the debits
are due. It can cost too much in bank fees if you screw up.
Before you give them, or anyone else, your hard-earned
bucks make sure you read the fund prospectus.
If you find a fund you like, go to Morningstar,
the gorilla mutual fund analyzer, for more research and independent
No load stocks
Hundreds of solid U.S. companies such as Coca Cola,
General Electric, Pfizer and Disney sell stock directly to shareholders
through a dividend reinvestment plan (DRIP) or direct stock purchase
They're called no-load because, originally, investors
paid no transaction fees. Or the fees were very minimal. You have
to be more vigilant today because some of the companies have gone
The piggies are charging separate fees for signing
you up, selling you shares and making automatic debit transactions
from your checking account; this can really hurt the small investor.
But don't worry. There's a Web site, Netstock
Direct, that provides free information on company DRIPs and
DSPs, including enrollment requirements, plan details and fees.
You'll also find a plan prospectus and application form for any
company that peaks your interest.
The Web is hopping with innovative investment ideas,
many of them geared to the small investor. He can buy fractions
of shares of stocks at low fees, and open a brokerage account with
no minimum balance. The Diva hopes the small investor is doing his
homework before he plunks down his cold cash for a quarter of a
share of whatever.
The following online brokers are getting a lot of
attention for their creative ways of transacting stock trades, and
are worthy of a look:
lets you open an account for as little as $20. The entire balance
can be invested in the stock of your choice. If it's a $15 stock,
you can buy 1.333 shares. There's a $2.99 fee per trade. That's
a lot of money for a $20 trade, but fair enough for a $100 trade.
has no minimum for opening an account. The fee is $5.00 for a one-time
trade, and $2 per trade if you're in a monthly investment plan.
The transaction fees are so low because stocks are
not transacted in real-time. Buyandhold.com trades twice a day and
Sharebuilder.com, once a week.
Before dipping your toe into the world of stocks and
mutual funds, please read the Diva's "Where
does a novice investor begin?" You'll find a compilation of
tips to guide you along your journey in the market.
-- Posted: Sept. 21, 2000