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- Investing
By Ben Baden
When times are tough, it can be daunting to come up with enough cash to start -- or continue -- investing. But even a relatively small amount of seed money can pay off big in the long run:
With an initial investment of $1,000 and monthly contributions of just $100, you could cash out with several hundred thousand dollars upon retirement.
Here's how to get an investment portfolio going with $1,000 or less:
ETFs
Exchange-traded funds, which look like mutual funds but behave like stocks, offer a simple, low-cost way to invest and gain instant diversification. Investors can buy as little as one share of an ETF, whereas mutual funds often require upfront investments of $3,000 or more. Like index funds, most ETFs mirror an index and therefore don't require a manager, so fees are often minuscule (0.53 percent for the average stock ETF, according to
There is one major drawback: ETFs are traded through brokerages, which typically charge a commission every time an investor buys or sells shares. A $7 commission may not sound like much, but trading multiple ETFs -- or making periodic contributions -- can put a dent in a modest investment. One option is to find a brokerage that charges low commissions, then trade infrequently and hold shares for a long period of time. Free trades aren't unheard of, but they're not common. Brokerage
All-in-one funds
Call it the lazy man's portfolio, but premixed funds offer instant diversification with no hassle.
The
STAR, which has returned an annualized 5 percent over the past decade and charges an annual fee of 0.32 percent, is Vanguard's only fund that will let investors in for $1,000 (all others require a $3,000 minimum investment).
Other fund companies will waive minimums if you agree to contribute regularly.
"Think of it as putting your investments on a regular schedule and putting them on autopilot," says Christine Benz, Morningstar's director of personal finance. T. Rowe Price offers more than 90 funds that require nothing upfront -- just a commitment to set up an automatic contribution of at least $50 per month.
Actively managed funds
If you prefer the expertise of a professional stock picker -- and are prepared to pay a bit more in annual fees -- you can invest in an actively managed fund for as little as $250.
For that amount, Pax World Funds offers a menu of socially screened funds, which take into account companies' environmental, social, and governance practices.
The Oakmark funds require a $500 minimum if investors agree to set up an automatic investment plan and contribute at least $100 on a monthly or quarterly basis. The flagship
Investing - Kick-Start a Portfolio With Just a Little Cash
© U.S. News & World Report
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