Friday, July 6, 2007

How to invest $100 per month


Hello. I have $100 that I can save or invest every month.
How can I invest this?


Good job saving $100 (or more) per month that you can save or invest.

1. What you can do is open a brokerage account such as:
  1. E*Trade
  2. TD Ameritrade

They offer many kinds of accounts, and you buy and sell stocks, and mutual funds. The minimum to open each account is $1000.

2. Then, choose a mutual fund with a minimum you can afford. Look through your brokerage mutual fund list, and only choose mutual funds that have no-load or no transaction fee. You can then visit and look for 4 or 5 star mutual funds.

In order to have a diversified portfolio, you can have three mutual funds:
1. Diversified International Mutual Fund
2. Large Capitalization USA Mutual Fund
3. Small Capitalization USA Mutual Fund

If you don't have that much money to start with, you can start with one mutual fund. And as you have more money to invest, you can start investing in another mutual fund, and so forth until you have three mutual funds.

3. Setup automatic investing using your Brokerage account. You can automatically invest at regular intervals (for example, once a month), and the system will automatically invest for you whether the market goes up or down.

Over the years, with the growth of the stock market (on average, gains around 10% per year over many years. Yes, some years, you could lose 10% and other years, gain 20%), you'll be amazed how much money you can accumulate!

What if you don't have $1000 saved?

I was researching mutual fund companies to see if they allowed a very low minimum to start an account (such as $50). I wasn't satisfied with the results.

So what I recommend is open a high yield money market or savings account which, at this time, should get you at least 5%. Then when you have $1000, you can open the brokerage account and invest at regular intervals in mutual funds as described above. You can also open a Complete Savings Account at E*Trade (getting 5.05% at this time). Then, when you are ready to open a Brokerage account at E*Trade, you can link both accounts (your complete savings account and your brokerage account) to the same E*Trade login/account.

If you are interested in getting started in investing (mutual funds, ETFs, or individual stocks), you can try this link here.

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